The government has miserably failed to meet the parliament-approved annual budget deficit target by Rs 200 billion, widening the gap to an alarming Rs799 billion.
The overall budget deficit – gap between expenditures and income – increased to 2.4% of the Gross Domestic Product (GDP) or Rs799 billion during July-December period of this fiscal year, reported the Ministry of Finance on Tuesday.
The results are in line with expectations of independent economists who anticipated the budget gap due to the expiry of the three-year $6.2 billion IMF bailout package that ended in September last year.
The first-half budget deficit was 63% of the annual target of Rs1.276 trillion or 3.8% of GDP. In order to achieve the parliament-approved annual budget deficit target, the government was required to restrict the deficit to Rs600 billion or 1.8% of the GDP during the first half.
This shows that the government has missed the first-half budget deficit target by about Rs200 billion, largely because of its failure in enhancing revenues. The 2.4% budget deficit was despite the fact the government blocked electricity subsidies payments, ordering Secretary Water and Power to write a letter to the Finance Ministry for clearance of dues.
The Finance Ministry missed the target by about Rs200 billion despite showing a huge statistical discrepancy of Rs57.2 billion in the first half which accounts for unexplained expenditure of Rs57 billion.
Missing the annual budget deficit target of Rs1.276 trillion or 3.8% of GDP would mean more reckless domestic and foreign borrowings to fill the gap. The Finance Ministry insists that parliament approves the budget deficit, which implicitly is a permission to take loans equivalent to the size of the budget deficit.
The federal government borrowed Rs240 billion from foreign lenders and Rs558.2 billion locally to bridge the budget deficit gap.
Under the three-year IMF programme, the government had managed to bring down the budget deficit to 4.6% of the GDP, although independent economists questioned the figure.
The IMF had stressed upon continuation of reforms introduced under the IMF programme as a prime factor in stabilising the economy, particularly in the energy sector.
