Fiscal Health Deteriorating Sharply half year data shows. Pakistan 's fiscal deficit surpassed 2.7 percent of GDP in the first half of this year. Despite the government 's allegations on the government' s fiscal policy and tightening policy, it was the highest in eight years. Nearly all major financial indicators in terms of spending and revenues worsened in the first half of the year compared to the same period last year.
Financial operating data released by the Ministry of Finance
According to the financial operating data released by the Ministry of Finance and Economy on Wednesday, the absolute fiscal deficit is 1.29 trillion US dollars in the first half (July-December 2018), almost 30% PML-N election spending session from the same period last year. The PTI government drastically cut development spending and net lending by 36 percent. Salaries and defense spending decreased by 32% and 22%, respectively. Since 2010-11, when the gap between government revenues and spending reached 2.9% of GDP or Rs 490 billion, there has never been a high fiscal deficit. Nonetheless, the country's fiscal deficit reached 2.6pc in 2012-13 and 2.5pc in 2011-12 and 2016-17.
Spending on defense spending has increased, but spending on public sector development programs has decreased by 37pc. The Ministry of Finance reported that the defense budget and the increase in the size of the GDP increased the size of the national economy, and the government reported that it had little room to spend on improving the standard of living. Data showed that total repayments of R777 billion in the first six months of the previous financial year increased by R126 billion or 32% compared to RMB75.1 billion in the same period last year.
Percent of GDP was 2.3% compared to 2.1% of GDP in the same period last year. Spending on defense spending in the first half of this year stood at Rs 479.6 billion, up from Rs 393 billion in the same period last year, a jump of 22pc or $ 87 billion. The share of GDP also rose by 1.2% from 1.1% of GDP in the same period of last year. Unfortunately, this has been cut in the Public Sector Development Program (PSDP). PSDP spending in the first half of this year declined 37% to Rs. 192 billion, falling to Rs 328 billion from Rs. 520 billion in the same period last year.
This is evident in the fact that overall development expenditure and net lending have fallen to 1% of GDP compared to 1.6% of last year's GDP. Total spending in the first half of the year increased by 5.5 percent to 3.36 trillion won from 3.18 trillion won in the same period last year. Trade in spending between the unproductive economy and the productive economic sector was included in 8.7% of GDP, compared to 8.9% in FY19.
However, current spending remained out of control
For example, current expenditure on FY19 represents Rs 2.98 trillion (Rs.4.4 billion, or about 18% increase) compared to FY182.55 trillion (Rs 18.8 billion). Current spending is 7.8pc of GDP during the CFY, which is significantly higher than last year's 7.1pc. On the other hand, total income fell to 6.1 percent in the first half of the year, compared with 6.6 percent in the previous fiscal year. Tax revenues also fell to 5.4 percent of GDP this year from 5.6 percent last year.
Non-tax revenue performance was not an exception to 0.6% of GDP in the first half of the year compared to 1% of GDP in the same period last year. On the absolute side, profitability was not good. For example, total revenues decreased by Rs. 58 billion (2.43 percent) to Rs 2,330 crore, compared with Rs. 2,380 billion in the first half of last year. This is a rare phenomenon that revenue collection was less than last year.
Tax revenues reached Rs 2.08 trillion in the first half of the year, a nominal increase of Rp. 55 billion (2.71 percent) from Rs 2.03 trillion. In general, tax revenues should increase annually with cumulative rates of inflation and economic growth. This means that your tax revenue should automatically increase by at least 11pc (more than 4pc GDP and 7pc inflation). Direct taxes also dropped to 1.8% of GDP during the CFY period, compared with 1.9% in the same period last year. Taxes on commodities and real estate also fell to 2.2%, to 2.1% of GDP.
The sales tax rate also fell to 1.8% of GDP from 1.9% last year. Non-tax revenues have also declined to Rs. 245 billion over the last six months, from Rs. 358 billion in the same period. Both the federal and provincial tax revenues have led to tax cuts.
Local government revenues have increased slightly, while local government revenues have increased slightly in absolute terms from 176 billion last year, while federal tax revenues have risen to Rs. 189 billion compared to Rs. 1.85 trillion in the same period last year.
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