Fiscal Deficit Widens to Rs. 1.7 Trillion in First Half of FY23

Pakistan’s fiscal balance in the first half of FY23 was around Rs. 1.7 trillion, a 23 percent increase over the deficit in the same period the previous fiscal year.

In terms of percentage of GDP, the deficit in 1HFY23 was 2%, the same as in the previous year’s corresponding period.

However, the primary balance recorded a surplus of Rs. 890 billion (1.1 percent of GDP) during 1HFY23, compared to a surplus balance in the primary account of Rs. 81 billion during the same period last year (0.1 percent of GDP).

Primarily, a 19 percent increase in total revenue to Rs. 4.7 trillion in 1HFY23 aided the fiscal balance, translating to 5.6 percent of GDP.

Total tax revenue collection increased by 17% year on year to Rs. 3.7 trillion. The Federal Board of Revenue (FBR) collected Rs. 3.4 trillion in taxes during the period, a 17 percent increase over the Rs. 2.9 trillion collected in 1HFY22.

Indirect tax growth remained flat in 1HFY23, compared to Rs 1.9 trillion in the previous year. This was primarily due to flat growth in sales tax of Rs. 1,272 billion and a 3% YoY decrease in Customs Duty of Rs. 467 billion.

Direct taxes, on the other hand, increased by 50% year on year to Rs. 1,526 billion, primarily contributing to overall revenue collection. Nonetheless, the government collected Rs. 967 billion in non-tax revenues, a 26 percent increase year on year. This was primarily due to a higher collection of Petroleum Levy of Rs. 177 billion, a 154 percent increase year on year. Furthermore, dividend collection increased by 57 percent year on year to Rs. 41 billion.

Surplus profit of the State Bank of Pakistan (SBP) remained absent despite amendments to the SBP Act 1956. Furthermore, total expenditure increased by 20% year on year to Rs. 6.4 trillion (7.6 percent of GDP compared to 8 percent of GDP in 1HFY22).

Further breakdown revealed that current expenditure increased by 30% year on year, with defence increasing by 23% year on year. However, markup payments increased by 77 percent year on year to Rs. 2,573 billion. Furthermore, the government’s development spending and net lending fell by 11% year on year to Rs. 637 billion.

Total PSDP expenditure in 1HFY23 was Rs. 591 billion (up 5% year on year), with provincial expenditure at Rs. 454 billion (up 24% year on year), outstripping federal expenditure of Rs 136 billion ( down 32 percent YoY).

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