FY23 ended with a 7.7pc deficit, not PDM’s claimed 7pc

Desk

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ISLAMABAD: The former PDM government left behind a massive fiscal deficit — the difference between income and expenditure — of 7.7 per cent of gross domestic product (GDP) while concluding the fiscal year 2022-23 on June 30, significantly higher than its claim of 7pc, according to official accounts.
Fiscal Operations Data, released by the Ministry of Finance on Thursday, put the overall fiscal deficit at Rs6.521 trillion during FY23 (7.7pc of GDP). While passing the current fiscal year (FY24) budget in June, the government had claimed the overall fiscal deficit at Rs5.94tr (7pc of GDP), showing a gap of about Rs580bn. Both documents are available on the ministry’s website.
Similarly, the previous government had claimed the primary deficit, defined by gap between income and expenditure other than interest payments, at 0.5pc of GDP, equivalent to Rs421bn in absolute numbers for FY23, but the latest official data showed the primary deficit was as wide as Rs690bn or 0.8pc of GDP.
While the provincial governments contributed to the slippage as they did not honour their commitment with the Centre, the federal government itself was responsible for the massive fiscal slippages. The Centre estimated Rs459bn provincial cash surplus while presenting the FY24 budget to contain the fiscal deficit for FY23, but they provided only Rs155bn, leaving a shortfall of about Rs304bn, while the remaining gap of about Rs385bn was on the part of the federal government.
Debt servicing cost jumps to Rs5.83tr or 6.9pc of GDP
In comparison, despite all the ‘fiscal indiscipline and violation of international agreements’, the PTI’s last year in power had concluded at a slightly higher fiscal deficit of 7.9pc of GDP or Rs5.260tr. The primary deficit in the PTI government’s last fiscal year (FY22) was significantly higher at 3.1pc of GDP or Rs2.077tr.
This manifested a massive 83pc increase in debt servicing costs over a period of one year. The debt servicing cost that stood at Rs3.18tr or 4.8pc of GDP in FY22 jumped to Rs5.83tr or 6.9pc of GDP in FY23 — highlighting the biggest elephant in the room challenging the state’s very existence.
Defence expenditure also had a fair share in rising current expenditure with a growth of 12pc in one year but was nothing when seen in the context of inflation rate and its drop as percentage of GDP to 1.9pc in FY23 instead of 2.1pc in FY22.
The PTI’s last year in power (FY22) had ended at a total revenue-to-GDP ratio of 12pc which declined to 11.4pc in last fiscal year (FY23) of the PDM government. Tax revenue to GDP ratio also declined from 10.1pc in FY22 to 9.2pc by end of FY23. On the other hand, non-tax revenue improved to 2.1pc of GDP in FY22 compared to 1.9pc a year earlier. The major addition to non-tax revenue was about Rs580bn collection on account of petroleum levy in FY23 against just Rs127bn a year earlier. In absolute numbers, the non-tax revenue jumped by 42pc.