Quarterly revenue generation target of Rs490bn was missed by about Rs62.7bn, bringing the total revenue collections to Rs427.3bn by end-Sept, 2009 which is 2.9pc of the projected GDP for the year.

ISLAMABAD: The federal government’s budget deficit stood at Rs223.7 billion against the target of Rs194 billion during the first quarter of current fiscal year highlighting a slippage of about Rs30 billion, mostly on account of lower-than-expected revenue collection.

This was about 1.5 per cent of the projected GDP for the year, says the Fiscal Policy Statement 2009-10 published by the ministry of finance. The government registered a revenue deficit of about Rs93.3 billion or 0.6 per cent of GDP during the same period, whereas the primary balance was in deficit by Rs67.6 billion or 0.45 per cent of projected GDP for 2009-10.

Owing to a higher than anticipated deficit in the first quarter, and lower-than-expected external inflows, the deficit financing targets have not been achieved in the first three months of 2009-10.

Originally, the targeted deficit of Rs159 billion was to be financed mostly through external inflows of Rs100 billion, with the remainder being split between domestic bank (Rs32 billion) and non-bank sources (Rs28 billion).

However, with the first quarter deficit reaching Rs223.7 billion, and with expected external inflows not materialising, a greater emphasis has been placed on domestic sources, which accounted for Rs146.6 billion of the financing.

The report says Rs39 billion of budgetary borrowings were from bank sources, whereas non-bank borrowing amounted to Rs107 billion. With private sector credit demand currently at low levels, the government has been able to borrow from the banking sector.

Though the total amount of tax collection by the Federal Board of Revenue (FBR) has reached Rs262.6 billion at the end of second quarter of 2009-10, as against a first quarter target of Rs286 billion, there has been a slippage in the direct taxes, which prevented FBR to meet the target of Rs32 billion by Sept, 2009.

Also with regard to revenue generation, the government missed its quarterly target of Rs490 billion by about Rs62.7 billion, for which the ministry of finance says the slippage is attributed to lower-than-expected performance of federal and provincial tax collection, as well as non-tax revenue.

The total revenue collections, which include FBR collection, provincial taxes, and non-tax revenues, reached Rs427.3 billion by end-Sept, 2009. As a percentage of projected GDP for the year, total revenues at the end of first quarter of fiscal year stood at 2.9 per cent.

However, with regards to revenue generation, the government missed its quarterly target of Rs490 billion by about Rs62.7 billion.

According to the report, the total expenditure for fiscal year 2008-09 was targeted at Rs2,391.5 billion, however, the year ended with Rs2,531.3 billion expenditure – Rs139.8 billion more than the target, mostly due to over spending of Rs165.8 billion in current expenditures.

Interest payment is the single largest component of current expenditure. A sum of Rs523.2 was budgeted for interest payments in 2008-09 but the year, however, ended with interest payments surpassing the target by Rs114.6 billion to Rs637.8 billion.