A budgetary deficit of Rs 41 billion during the first quarter of the current fiscal


Jan 05 - 11, 2004



Living beyond seems to have become a way of life of Pakistanis both in their collective as well as individual capacity. Just how routine this has become is evident from the fact that the government ran a budgetary deficit of Rs 41 billion during the first quarter of the current fiscal ended September 30 as per the report released last month by the federal government about its earnings and expenditure.

According to the report, the cumulative earnings of the federal government far surpassed the revenue that it earned during the first quarter (July-September) of the current fiscal. The government's cumulative spendings totaled Rs 206.527 billion way over Rs 165.589 which it earned under various heads during the first quarter of the current fiscal. In simple language it means that the federal government ran a budgetary loss of Rs 40.938 billion during the first quarter ended September.

The major contributors to the earnings were the federal taxes and surcharge on petroleum and gas while over 27 per cent of it came from non-tax resources. The federal taxes contributed Rs 95.2 billion, petroleum and gas surcharge contributed Rs 15.934 billion (petroleum surcharged Rs 11.329 billion, gas surcharge Rs 4.605 billion) while over 27 per cent or Rs 45.841 billion were generated from the-non tax income.

On the expenditure side, Rs 44.158 went towards payment of interest on loans while Rs 45.745 billion was spent on defence the remaining went towards meeting the current expenses of the government. In addition, the federal government borrowed Rs 4.933 billion from various countries plus another Rs 34.006 billion from within the country while it earned Rs 2 billion from the sales of a number of national organisations the amount of which totals almost the same as the budget deficit loss of Rs 41 billion that it ran during the said period.

According to the information released on the website of the central bank, the State Bank of Pakistan, the federal government borrowed Rs 25 billion from the commercial banks during the first four months of the current fiscal. It also paid back Rs 9.20 billion loans to the banks during the same period which were taken in the past for the purchase of commosities and other items.

According to the statistics released by the State Bank on its website the federal government has to limit its budget support loans under the credit plan or loan plan from the banks under Rs 15 billion during the fiscal 2003-04. The fact that the government's borrowing already surpassed the limit during the first quarter doesn't necessarily mean that it would not be able to limit the bank borrowing's to Rs 15 billion during the remaining 8 months. It, however, clearly indicates that the government's expenses have far exceeded its income during the four months which needs to be monitored closely to avoid heavy budget deficit 8 months later. There are many that claim that the borrowing shows that the government is taking advantage of the low interest rates as mark up rates on one of the major mode of getting loans by the government from the banking sector has declined to historic lows. This in turn has enabled the government to get loans on extremely low interest rates, the arguments continue. However, the massive spending in excess of income during the first quarter and borrowing from the commercial banks way beyond the fixed Rs 15 billion limit during the first four months highlights the need for a tight budgetary control to avoid deficit in the remaining months of the current fiscal.



It also highlights the need for the government to cut its expenditure, particularly the non-development expenses which push up the administrative expenses at the expense of the exchequers in a country reeling from a low per capita income. For instance, the main opposition group the ARD has said that it would challenge the heavy increase in the salaries of the parliamentarians. While it remains to be seen whether the opposition, whose members also benefit from the heavy increase in salary and perks, would make good on its promise it has said that the increase would cost the exchequers an extra Rs 9 million alone in salaries of the members of the National Assembly alone.

Needless to say, the over 200 per cent increase in the salaries of the parliamentarians national, provincial and the Senate would cost the exchequers a bundle the burden of which would be borne by the people. The salaries of the parliamentarians of the Punjab Assembly were increased by the governor of the province before they took the oath of the office last year and the province has already inducted a record number of ministers, 41, just recently. However, according to latest reports, the cabinet of the Punjab government would further be expanded as six more ministers and advisors are likely to be appointed any time now. With every such induction not only the exchequers have to absorb the salaries and the perks that they are finding harder and harder to afford. For instance the Punjab government has placed orders to purchase 13 new cars for the new ministers which would cost Rs 16.92 million to the exchequers.

Living within means has become more of a meaningless sermon on the part of the rulers who do not practice it themselves.