ISLAMABAD: The government has overdrawn Rs85 billion from the State Bank of Pakistan (SBP) in the last few days due to provinces going on a spending splurge at the end of their five-year tenure.
According to officials in the finance ministry, the centre would fail to meet rising requirements of debt servicing, defence and development with limited resources due to over 62 percent resources under federal divisible being allocated to provinces under National Finance Commission (NFC) awards, reported The News.
A top finance ministry official stated a solution to this issue would have to be found since the country couldn’t be run with such a hard framework of NFC heavily tilted towards provinces.
The officials cited widespread fund utilization had made it gruelling for the centre to limit the budget deficit within the preferable limits for the outgoing financial year ending June 30th.
And provinces share in the federal divisible pool rose to more than 60 percent from 37.5 percent. The federal government has utilized overdraft of around Rs5 billion compared to provinces which utilized majority of the overdrafts.
The officials added the provinces were still receiving money from the central bank in form of overdrafts.
‘Ways and means’ restriction in form of overdrafts from the central bank was also boosted for the provinces, which depleted the limits in one go.
Also, the finance ministry is monitoring the situation and isn’t sure about where the fiscal deficit would touch by end of the outgoing financial year at end of June.
Finance ministry is concentrating on reining in the fiscal deficit when the interim setup takeover power in the coming few days.
A senior official said “We have prepared a plan under which the provinces would be forced to give revenue surplus in the range of Rs100 to Rs150 billion. No one knows how much the budget deficit could escalate by end June 30, 2018.”
The hopes of the finance ministry have diminished over the provinces returning revenue surplus equal to one percent of GDP and the centre would be devising ways to subtract the appropriate amount from NFC share for June 2018.
This would enable to rein in the deficit within projected limits of 5.5 to 5.6 percent of GDP for FY18.
