Chapter 4

Fiscal Development

Introduction projects are under implementation along with

capacity expansion of industries.
Fiscal policy has an effective role in promoting
sustainable and inclusive growth. A well On fiscal side, unprecedented public
structured fiscal policy ensures the efficient expenditures and persistently low revenues
allocation of public resources. It encourages undermined the stability of the fiscal accounts.
effective public spending and creates fiscal However, during the past five years, this sector
space for priority investments thus creating a has witnessed a notable improvement on
favorable environment for achieving higher account of wide ranging reforms in the area of
economic growth. However, it is equally resource mobilization and expenditure
important to maintain fiscal discipline that is management. The substantive measures taken
essential to boost economic performance and in a challenging environment to control
preserving macroeconomic stability. unproductive expenditures as well as increasing
revenues helped in generating additional fiscal
Pakistan has made substantial progress in the
space for expenditure on development and
last five years which is characterized
social safety net.
by macroeconomic stability, improved fiscal
indicators, low inflation, sustained growth rate, Particularly, the restructuring plan of key Public
high forex reserves and significant performance Sector Enterprises (PSEs) as well as power
of stock market. Prior to 2013, the economy sector reforms is in progress. These reforms are
was caught up in persistent energy shortages, providing the needed support to reduce
double-digit inflation, low development financial losses and related fiscal costs, thus
spending, mounting fiscal deficit, low tax creating more fiscal space for various growth-
revenues, negative credit to private sector and oriented projects. It is evidenced that during
deteriorating law and order situation. the past five years, total development
Nevertheless, the present government took all expenditures (excluding net lending) increased
these challenges head-on and within five years from 3.5 percent of GDP during FY2013 to 5.3
achieved stabilization and higher economic percent of GDP during FY2017.
growth.
Overall, Pakistan’s fiscal position improved
The economic performance remained strong as considerably given that the consolidated fiscal
growth accelerated significantly to 5.37 percent deficit that averaged 7.2 percent of GDP
in FY2017, supported by a broad-based growth between FY2009 and FY2013 registered a
in Agriculture, Industrial and Services sectors, decline to an average of 5.8 percent between
while inflation remained well below the FY2013 and FY2017.The government remained
target. The issue of power crises was taken on focused on a gradual reduction of the
as a priority which consequently created an fiscal deficit whilst being committed to fiscal
improved energy situation thus resulting in consolidation. Overall, the fiscal deficit
Industrial and Services sectors growth. registered a persistent decline from 8.2 percent
Whereas, for FY2018 the GDP growth is of GDP in FY2013 to 5.5 percent, 5.3 percent
estimated at 5.79 percent (Provisional). This and 4.6 percent over the successive 3 years.
shows that the growth prospects of Pakistan’s However, during FY2017 the fiscal deficit
economy from FY2018 onwards are increased to 5.8 percent against the revised
encouraging given that vast infrastructure target of 4.2 percent of GDP primarily due to
Pakistan Economic Survey 2017-18
low provincial surplus, a shortfall in FBR tax comparable period of FY2017.
collection and increase in project loans on
account of CPEC related activities. On positive side, with 17.5 percent growth,
FBR tax collection increased to Rs 2,257.6
Nevertheless, during the first half of FY2018, billion during July-February, FY2018 against
fiscal sector has performed reasonably well on Rs 1,921.7 billion in the comparable period of
account of higher growth in revenue collection FY2017. The rise in FBR tax revenues is
and increase in provincial surplus. mainly attributed to various tax measures taken
Encouragingly, the growth in revenue during the last few years along with increase in
collection outpaced the increase in expenditure economic activity and strengthening of
during the period under review. domestic demand.

Looking at the performance of the key fiscal Aforementioned developments and efforts are
indicators to the end of first half of current the testament of this fact that the fiscal position
fiscal year, it is visible that total revenues grew has improved significantly and the government
by 19.8 percent, whereas in terms of GDP it is highly committed to furthering gains derived
increased to 6.9 percent. Within revenues, both during the past five years.
tax and non-tax revenues grew by 16.4 percent
and 43.4 percent respectively during first half Fiscal Policy Developments
of FY2018. While in terms of GDP, tax A cursory look at table 4.1 indicates a change in
revenues contributed 5.9 percent and non-tax pattern of both revenues and expenditures over
revenues 1.0 percent during the same period. the past decade. On revenue side, revenue-to-
GDP ratio witnessed a declining trend between
On the other hand, expenditures increased by
FY2008 and FY2012. Similarly, tax-to-GDP
14.0 percent and in terms of GDP, it was
ratio remained within the narrow range of 9.1
recorded at 9.2 percent. Of total expenditures,
percent to 10.2 percent of GDP between
growth in development expenditures (excluding
FY2008 and FY2012 largely due to structural
net lending) remained robust as it stood at 23.4
weaknesses in the tax system. However, in
percent, whereas current expenditures grew by
recent years, tax-to-GDP and hence revenue-to-
13.5 percent.
GDP ratios have witnessed a marked
Hence, strong growth in revenues relative to improvement, particularly since FY2013.
expenditures helped in containing fiscal deficit
Total revenues as percentage of GDP increased
to 2.3 percent of GDP during first half of
from 13.3 percent in FY2013 to 15.4 percent
FY2018 as compared to 2.5 percent of the
during FY2017. Within total revenue, overall
corresponding period of last year. Likewise,
tax collection also grew from 9.8 percent in
revenue deficit reduced to 0.5 percent of GDP
FY2013 to 12.4 percent of GDP during
and primary deficit declined to 0.1 percent of
FY2017. On the other hand, non-tax revenues
GDP during July-December, FY2018 against
stood at 3.0 percent during FY2017 against 3.5
0.8 percent and 0.5 percent respectively in the
percent of GDP in FY2013.
Table 4.1: Fiscal Indicators as Percent of GDP
Year Real GDP Overall Expenditure Revenue
Growth Fiscal Deficit Total Current Development/1 Total Rev. Tax Non-Tax
FY2008 5.0 7.3 21.4 17.4 4.0 14.1 9.9 4.2
FY2009 0.4 5.2 19.2 15.5 3.5 14.0 9.1 4.9
FY2010 2.6 6.2 20.2 16.0 4.4 14.0 9.9 4.1
FY2011 3.6 6.5 18.9 15.9 2.8 12.3 9.3 3.0
FY2012 3.8 8.8 21.6 17.3 3.9 12.8 10.2 2.6
FY2013 3.7 8.2 21.5 16.4 5.1 13.3 9.8 3.5
FY2014 4.1 5.5 20.0 15.9 4.9 14.5 10.2 4.3
FY2015 4.1 5.3 19.6 16.1 4.2 14.3 11.0 3.3
FY2016 4.56 4.6 19.9 16.1 4.5 15.3 12.6 2.7
FY2017 5.37 5.8 21.3 16.3 5.3 15.4 12.4 3.0
FY2018 B.E 6.0 4.1 21.3 15.0 6.3 17.2 13.7 3.5
/1
including net lending
Note: Estimated growth during FY2018 is 5.79 percent.

50
 Fiscal Development

However, the pace of growth in revenues stand at Rs 1,693.5 billion in FY2017 from Rs
remained slow during FY2017 as compared to 777.1 billion in FY2013. Expenditures under
FY2016 primarily due to low FBR tax revenues PSDP (Federal and Provincial) registered a
and provincial taxes. During FY2017, overall significant rise as it increased from Rs 695.1
tax revenues posted a growth of 8.4 percent billion in FY2013 to Rs 1,577.7 billion in
against an impressive growth of 21.3 percent FY2017. Particularly, Federal PSDP (net
recorded in FY2016. In terms of GDP, tax excluding development grants to provinces)
revenues reduced to 12.4 percent in FY2017 increased from Rs 323.5 billion during FY2013
from 12.6 percent recorded in FY2016. to Rs 725.6 billion in FY2017. During FY2018,
the size of PSDP has been increased to Rs
While, FBR tax collection grew by 8.2 percent 2,113 billion. Out of this Rs 1,112 billion has
in FY2017 as compared to remarkable growth been allocated to provinces and Federal PSDP
of 20.2 percent witnessed in FY2016. In fact, has been estimated at Rs 1,001 billion.
various tax incentives and relief measures to
encourage investment, exports and domestic Encouragingly, the allocation under BISP
production added to the slower growth in tax (development expenditure outside PSDP) has
revenues during FY2017. also witnessed a substantial increase of 73
percent to reach Rs 121 billion during FY2018
Similarly, the taxes collected by the provincial from Rs 70 billion in FY2013.
governments grew by 13.6 percent during
FY2017 against an impressive growth of 37.6 During FY2017, total expenditures grew by
percent recorded in FY2016. 17.3 percent against 7.6 percent in FY2016 on
the back of 10.7 percent increase in current
A strong reversal in growth of non tax revenues expenditures and 30.1 percent growth in
has been witnessed during FY2017 after a sharp development expenditures (excluding net
decline in FY2016. Contrary to tax revenues, lending). It is expected that total expenditure
non tax revenues posted a significant growth of would remain at 21.3 percent of GDP during
23 percent during FY2017 over preceding year FY2018 on account of expected decline in
which is largely attributed to one-off receipts current expenditure. Conversely, development
from disinvestment of government stakes in the expenditure is budgeted to increase from 5.3
Pakistan Security Printing Corporation and sale percent of GDP to 6.3 percent of GDP in
of two LNG power plants under the Pakistan FY2018.
Development Fund. Viewed from GDP
perspective, non tax revenues increased to 3.0 Prior to FY2013, delays in key reforms for
percent during FY2017 from 2.7 percent in revenue mobilization and unprecedented rise in
FY2016. expenditures resulted in high fiscal deficit.
However, the present government has not only
For FY2018, total revenues are expected to taken various measures to promote stronger
reach 17.2 percent of GDP on account of 13.7 economic growth but it has also followed
percent and 3.5 percent target of tax and non- deficit reduction measures in the interests of the
tax revenues respectively. country’s long-term growth such as revenue
On expenditure side, total expenditures stood at collection and expenditure are being monitored,
21.3 percent of GDP during FY2017 against efforts are being made to avoid un budgeted
21.5 percent of GDP in FY2013. In total expenditure, expenditures are being made in the
expenditures, current expenditures recorded at light of flow of revenue receipts and other
16.3 percent of GDP in FY2017 against 16.4 receipts through implementation of ways and
percent of GDP recorded in FY2013. While the means procedure and ban on purchase of all
development expenditure and net lending edged type of vehicles both for current as well as
above 5 percent in FY2017 and stood at 5.3 development expenditure except operational
percent of GDP against 5.1 percent of GDP vehicles of law enforcing agencies.
recorded in FY2013. Consequently, the fiscal deficit has fallen from
a peak of 8.2 percent of GDP in FY2013 to 5.8
Total development expenditures (excluding net percent in fiscal year 2017 and is expected to
lending) grew by more than 100 percent to fall further during the current fiscal year.
51
Pakistan Economic Survey 2017-18
201

Fig: 4.1 Revenue-Expenditure

Expenditure Gap (% of GDP)

Expenditures
20
% of GDP

Fiscal Deficit
16

12
Revenue
8
FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

FY2018
B.E
On the other hand, provinces could not maintain their strong fiscal position during FY2017 as
compared to previous years. The provinces posted a cumulative deficit of Rs 15.9 billion during
FY2017 against the surplus of Rs 207.4 billion in FY2016 on account of significant rise in
provincial expenditure and slow pace in own revenue collection.

Structure of Tax Revenue

The present government has undertaken various policy and adm administration
inistration reforms in order to
address low tax revenues with an aim to improve the effectiveness and fairness of tax administration,
promote compliance and broadening the tax base.
base These measures have started paying dividends in
shape of improved tax revenues
nues in terms of GDP.

Overall tax- GDP ratio has increased from 9.8 percent during FY2013 to 12.6 percent during
FY2016, however, it fell to 12.4 percent in FY2017 on account of relief measures and tax incentives
introduced through the Federal Budget for FY2017.

Fig-4.2:
4.2: Tax to GDP ratio
20 Provinces Federal
13.7 %
12.6 %

12.4 %

15
11.0 %
10.2 %

10.2 %
10.1 %
9.9 %

9.8 %
9.8 %

9.6 %

9.3 %
9.1 %

10
12.1
11.6

11.4
10.2
9.4
9.7

9.2
9.7
9.5
9.3

9.2

8.9
8.8

0
FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

FY2018
B.E

52
 Fiscal Development
Within tax collection, FBR Tax revenues increased from Rs 1,946 billion in FY2013 to Rs 3,368
billion in FY 2017, registering an overall growth of around 73 percent. While as percentage of GDP,
it grew from 8.7 percent in FY 2013 to 10.5 percent of GDP during FY2017.

Fig-4.3:
4.3: FBR Tax Collection
3,500 Total (FBR) Rs billion
11
3,000 FBR Rev as % of GDP

2,500
9
2,000

1,500 7

1,000

500 5
FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

FY2018
B.E
The tax structure in Pakistan is skewed towards Consequently, the share oof indirect taxes
indirect taxes. However, Pakistan has witnessed reduced from 68.5 percent in FY2006 to 60.1
a visible improvement in its tax structure on percent of total FBR tax during FY2017 (Table
account of efforts to control the unjustified 4.2).
balance between direct and indirect taxes.

Fig-4.4.a:- % of Total FBR Tax (FY2006) Fig-4.4b:

4.4b: % of Total FBR Tax (FY2017)

Direct
Tax
32% Direct
Tax
40%

Indirect
Indirect Tax
Tax 60%
68%

Within Indirect tax, the proportion of sales tax The base of indirect taxes particularly of sales
increased from 60.3 percent in FY2006 to 70.3 tax has further contracted due to shifting of
percent during FY2012. However, the share has services to the provincial governments like
witnessed a gradual decline since FY2013 and telecommunication,
on, banking and insurance
reduced to 65.7 percent in FY2017. During services which were the major source of
FY2018, the share of sales tax is budgeted at revenue of sales tax. Moreover, over a period of
66.4 percent of indirect taxes.
tax On the other time the sales tax has been restructured as a tax
hand, in total FBR tax collection, the share of on consumption, which is in line with the
sales tax reduced from 41.3 percent in FY2006 principle of equity and progressivity.
to 39.5 percent during FY2017.

53
Pakistan Economic Survey 2017-18
Likewise, Customs duty constituted 24.5 total taxes has increased over the years.
percent of indirect taxes during FY2017 against Historically, the share of direct taxes has
28.3 percent recorded in FY2006. The share is increased from 19 percent in FY1971 to 32
likely to be 24.0 percent during current fiscal percent in FY2006. It has further jumped to
year. It is worth mentioning that the maximum 38.2 percent in FY2013 and now it is 40
statutory rates of customs duty have been percent in FY2017.
gradually reduced from 125 percent in FY1988
to 20 percent in FY2016. Resultantly, the The improved performance of direct taxes is
contribution of customs duty in total FBR mainly due to a number of reform initiatives
collection has come down from 45.7 percent in undertaken in the past like introduction of
FY1991 to 15 percent in FY2017. Universal Self-Assessment Scheme (USAS),
promulgation of Income Tax Ordinance, 2001
Whereas, the share of federal excise duty (FED) where emphasis was shifted to voluntary
reduced from 11.3 percent of indirect taxes in compliance, automation of entire business
FY2006 to 9.8 percent during FY2017. During processes and reduction of corporate tax rates
FY2018, its share is expected to reduce further from peak of 49 percent to 31 percent in tax
to 9.6 percent. The tax base of FED contracted year 2017 and 30 percent onwards by providing
over the years and now is restricted to only few level playing field to the taxpayers. With the
commodities like cigarettes, cement, beverages, help of all these initiatives, tax revenue
international travel etc. The contribution of collection from direct taxes has increased
FED in the total collection has also dropped substantially and will increase in future. A
from 20 percent in FY1991 to 6 percent during comparison of direct and indirect taxes in terms
FY2017. of contribution in overall federal taxes collected
by FBR indicates that the reliance on indirect
On the other hand, the share of direct taxes in taxes has reduced to a great extent.
Table 4.2: Structure of Federal Tax Revenue Rs billion
Year Total (FBR) Tax Rev as % of Direct Taxes Indirect Taxes
GDP Customs Sales Excise Total
FY2006 713.5 8.7 225.0 138.4 294.8 55.3 488.5
[31.5] {28.3} {60.3} {11.3} [68.5]
FY2007 847.2 9.2 333.7 132.3 309.4 71.8 513.5
[39.4] {25.8} {60.3} {14.0} [60.6]
FY2008 1,008.1 9.5 387.9 150.7 377.4 92.1 620.2
[38.5] {24.3} {60.9} {14.9} [61.5]
FY2009 1,161.1 8.8 443.5 148.4 451.7 117.5 717.6
[38.2] {20.7} {62.9} {16.4} [61.8]
FY2010 1,327.4 8.9 526.0 160.3 516.3 124.8 801.4
[39.6] {20.0} {64.4} {15.6} [60.4]
FY2011 1,558.2 8.5 602.5 184.9 633.4 137.4 955.7
[38.7] {19.3} {66.3} {14.4} [61.3]
FY2012 1,882.7 9.4 738.4 216.9 804.9 122.5 1,144.3
[39.2] {19.0} {70.3} {10.7} [60.8]
FY2013 1,946.4 8.7 743.4 239.5 842.5 121.0 1,203.0
[38.2] {19.9} {70.0} {10.1} [61.8]
FY2014 2,254.5 9.0 877.3 242.8 996.4 138.1 1,377.3
[38.9] {17.6} {72.3} {10.0} [61.1]
FY2015 2,589.9 9.4 1,033.7 306.2 1,087.8 162.2 1,556.2
[39.9] {19.7} {69.9} {10.4} [60.2]
FY2016 3,112.7 10.7 1,217.3 404.6 1,302.7 188.1 1,895.4
[39.1] {21.3} {68.8} {9.9} [60.9]
FY2017 3,367.9 10.5 1,344.2 496.8 1,329.0 197.9 2,023.7
[39.9] {24.5} {65.7} {9.8} [60.1]
FY2018B.E 4,013.0 11.2 1,594.9 581.4 1,605.2 231.5 2,418.1
[39.7 {24.0} {66.4} {9.6} [60.3]
[]as of total taxes {} as % of indirect taxes
Source: Federal Board of Revenue

54
 Fiscal Development

The government has initiated various policy payments, untargeted subsidies, loss making
and administrative reforms measures including PSEs and security related expenses further
broadening of tax base, withdrawal of intensified the challenges and exposed the
exemptions/concessions, differential taxation country to high fiscal deficit of over 8 percent
for non-filers, conversion of CNIC into NTN of GDP. However, the present government has
for individual taxpayers, behavioural change not only contained the fiscal deficit but also put
and strengthening of tax audit etc (Box-I). it on downward trajectory. The achievement
These measures would further increase the was realized through higher revenue collection
contribution of direct taxes in overall FBR tax as a result of improved administration and
revenues in coming years. broadening of the tax base, undoing decades-
old concessionary SRO and restricting non-
Review of Public Expenditures development expenditure.
The Government’s commitment to promote
inclusive and sustainable development by Table 4.3 discloses the trend in composition of
ensuring effective utilization of funds for expenditure over the past few years. It reveals
priority areas is at the forefront of its reform that earlier the increasing trend in total
expenditure was on account of a rise in current
agenda.
expenditure, however, in later years particularly
In the past, unprecedented rise in public since FY2013, the rise in expenditures was on
expenditures together with weak revenue account of significant rise in development
performance posed multifaceted challenges for expenditure. The government’s adherence to
better fiscal management. Unproductive and prudent expenditure management paved the
reckless spending owing to high interest way towards increasing expenditures on
development and social security.

Table 4.3: Trends in Components of Expenditure (As % of GDP)

Year Total Current Mark- Defence Develop- Non Fiscal Revenue Primary
Expen- Expen- up (D) ment Interest Deficit Deficit/S Balance
diture diture Payment Expen- Non- urplus (TR-NI
(A) s (C) diture* Defence (TR- Exp)
Exp Total
(A-C-D) CE)
FY2006 17.1 12.6 2.9 2.9 4.4 11.2 4.0 0.5 -1.1
FY2007 18.1 14.9 4.0 2.7 4.7 11.4 4.1 -0.8 -0.1
FY2008 21.4 17.4 4.6 2.6 4.2 14.2 7.3 -3.3 -2.7
FY2009 19.2 15.5 4.8 2.5 3.4 11.8 5.2 -1.4 -0.3
FY2010 20.2 16.0 4.3 2.5 4.1 13.4 6.2 -2.1 -1.9
FY2011 18.9 15.9 3.8 2.5 2.8 12.6 6.5 -3.5 -2.7
FY2012 21.6 17.3 4.4 2.5 3.9 14.6 8.8 -4.5 -4.3
FY2013 21.5 16.4 4.4 2.4 3.5 14.7 8.2 -3.0 -3.8
FY2014 20.0 15.9 4.6 2.5 4.5 12.9 5.5 -1.5 -1.0
FY2015 19.6 16.1 4.8 2.5 4.1 12.3 5.3 -1.8 -0.6
FY2016 19.9 16.1 4.3 2.6 4.5 13.0 4.6 -0.9 -0.3
FY2017 21.3 16.3 4.2 2.8 5.3 14.3 5.8 -0.8 -1.6
FY2018 21.3 15.0 3.8 2.6 6.3 14.9 4.1 2.2 -0.3
B.E
* excluding net lending
Source: Budget Wing, Finance Division and EA Wing's Calculations

55
Pakistan Economic Survey 2017-18
201

A brief look into past year performance On the other hand, defence expenditure, posted
indicates that total expenditures increased by a growth of 17.2 percent during FY2017 due to
17.3 percent and amounted to Rs 6,800.5 billion ongoing
oing security related spending and stood at
during FY2017 against Rs 5,796.3 billion in Rs 888.1 billion (2.8 percent of GDP) against
FY2016. In terms of GDP, total expenditures Rs 757.7 billion (2.62.6 percent of GDP)
GDP in
increased by 1.4 percentage point to reach 21.3 FY2016.
percent of GDP during FY2017 against 19.9
percent of GDP recorded in FY2016. Total With regard to current subsidies, it has not only
expenditures are expected to remain at 21.3 reduced in terms of growth but its share in
percent of GDP during current fiscal year. current expenditure ha has also declined
considerably. In absolute term, it stood at Rs
153.7 billion during FY2017 against Rs 207.2
Fig-4.5:
4.5: Growth in Total expenditure billion during FY2016, posting a negative
55 Total expenditure
growth of 25.8 percent.. In FY2018, current
Current
Development subsidies are budgeted to remain at Rs 138.8
40
Growth rate%

billion.
25
There hass been a consistent rise in development
d
expenditures since FY2014. Overall
10
development expenditures and net lending
-5
increased from Rs 1,314.1 billion during
FY2016 to Rs 1,680.7 billion during FY2017,
FY2018B.E
FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

posting a growth of 27.9 percent.

percent

Encouragingly, development expenditure

(excluding net lending) grew sharply by 30.1
Likewise, the growth in current expenditures percent during FY2017 and outpaced the
increased by 10.7 percent to stand at Rs 5,197.9 growth in current expenditure during the second
billion (16.3 percent of GDP) during FY2017 consecutive year. In absolute term it stood at Rs
against Rs 4,694,3 billion (16.1 percent of 1,693.5 billion (5.3 percent of GDP)
GDP during
GDP) in the preceding year. Nevertheless, the FY2017 against Rs 1,301.5 billion (4.5 percent
proportion of current expenditures in total of GDP) during FY2016.
expenditures has declined from 80.1 percent
during FY2016 to 76.4 percent in FY2017. It is Within development expenditures, PSDP
expected to decline further to 70.5 percent in spending has witnessed a noticeable surge since
FY2018. The consistent decline in proportion is FY2013. Overall, PSDP spending posted a
largely attributed to decreasing share of mark-
mark growth of 33.1 percent and stood at Rs 1,577.7
up payments and subsidies in current billion during FY2017 against Rs 1,185.8
expenditure. billion in FY2016. Of total, Federal PSDP (net
excluding development grants to provinces)
Within current expenditures, markup payments increased to Rs 725.6 billion during FY2017
grew by 6.7 percent and stood at Rs 1,348.4 against Rs 593.4 billion during FY2016, thus
(4.2 percent of GDP)) billion during FY2017 registered a growth of 22 percent.
percent The size of
against Rs 1,263.4 billion (4.3 percent of GDP) Federal PSDP has been increased to Rs 1,001
in FY2016. During FY2018, mark-up
mark payments billion for FY2018 which is 38 percent higher
are expected to reach 3.8 percent of GDP. than last year’s
’s actual realization of PSDP
Going forward, the
he share of mark-up
mark payments spending. The rise in development expenditure
in total expenditure has declined noticeably. implies that the economy is geared up to
Accordingly, it has provided substantial space achieve higher inclusive growth.
for higher development expenditures.

56
 Fiscal Development

Fig-4.6:
4.6: Expenditures % of GDP Current Expenditure
Development Expenditure
25
Total Expenditure

20

15

10

0
FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

FY2018
B.E
Fiscal Performance (July-December,
December, increased at faster rate than the growth in
FY2018) expenditures. As a result, fiscal deficit
contained at 2.3 percent of GDP during first
The consolidated Revenue and expenditure of
half of current fiscal year against 2.5 percent of
the Government
overnment indicates a significant
GDP recorded in the co comparable period of
improvement in key fiscal indicators during the
FY2017.
first half of current fiscal year. Revenues

Table 4.4: Consolidated Revenue & Expenditure of the Government

Budget Estimates July-December
December (Rs billion) Growth
FY2018 FY2018 FY2017
A. Total Revenue 6,167.2 2,384.7 1,990.6 19.8
% of GDP 17.2 6.9 6.2
a) Tax Revenue 4,912.5 2,026.9 1,741.2 16.4
% of GDP 13.7 5.9 5.4
Federal 4,330.5 1,850.5 1,595.5 16.0
of which FBR Revenues 4,013 1,730.1 1,467.3 17.9
other Federal 317.5 120.4 128.1 -6.0
Provincial Tax Revenue 582 176.4 145.7 21.1
b) Non-Tax Revenue 1,254.7 357.8 249.4 43.4
% of GDP 3.5 1.0 0.8
B. Total Expenditure 7,646.8 3,181.0 2,789.7 14.0
% of GDP 21.3 9.2 8.7
a) Current Expenditure 5,393.9 2,545.2 2,241.6 13.5
% of GDP 15.0 7.4 7.0
Federal 3,451.1 1,656.0 1,473.5 12.4
Markup Payments 1,363 751.4 647.4 16.1
% of GDP 3.8 2.2 2.0
Defence 920.2 393.4 336.3 17.0
% of GDP 2.6 1.1 1.1
Provincial 1,942.8 889.3 768.1 15.8
b) Development Expenditure & net 2,252.9 615.9 490.9 25.4

57
Pakistan Economic Survey 2017-18

Table 4.4: Consolidated Revenue & Expenditure of the Government

Budget Estimates July-December (Rs billion) Growth
FY2018 FY2018 FY2017
lending
% of GDP 6.3 1.8 1.5
PSDP 2,113 558.8 445.7 25.4
Other Development 152.2 55.0 51.7 6.5
c) Net Lending -12.3 2.0 -6.4 -131.4
e) Statistical discrepancy - 19.9 57.2 -65.2
C. Overall Fiscal Deficit 1,479.6 796.3 799.1 -0.4
As % of GDP 4.1 2.3* 2.5
Financing of Fiscal Deficit 1,479.6 796.3 799.1 -0.4
i) External Sources 511.4 384.1 240.9 59.5
ii) Domestic 968.1 412.2 558.2 -26.2
- Bank 390.1 331.8 407.1 -18.5
- Non-Bank 528 80.4 151.1 -46.8
Privatization Proceeds 50
GDP at Market Prices 35,919 34,396 31,963
*: on the basis of revised GDP
Source: Budget Wing, Finance Division
Total revenues grew by 19.8 percent to reach July-December, FY2018 against the negative
Rs 2,384.7 billion (6.9 percent of GDP) during growth of 31.8 percent seen in the same period
July-December, FY2018 against Rs 1,990.6 of FY2017. In absolute term, it amounted to Rs
billion (6.2 percent of GDP) in the same period 357.8 billion as compared to Rs 249.4 billion in
of FY2017. The impressive performance both the comparable period of FY2017.The major
in tax and non tax revenues attributed to this source of this rebound was dividends, mark-up
significant rise in total revenues. payment, surplus profit of SBP, defence and
PTA profit etc.
Tax revenues amounted to Rs 2,026.9 billion
(5.9 percent of GDP) during first half of Total expenditure grew by 14.0 percent during
FY2018 as compared to Rs 1,741.2 billion (5.4 July-December, FY2018 and stood at Rs
percent of GDP) in the same period of FY2017, 3,181.0 billion (9.2 percent of GDP) against Rs
registering a growth of 16.4 percent. Tax 2,789.7 billion (8.7 percent of GDP) in the
revenues picked up sharply in response to same period of FY2017. Within total
increase in economic activity and strong expenditure, development spending (excluding
domestic demand along with fiscal measures net lending) increased sharply and recorded at
taken during the last few years. 23.4 percent to reach Rs 613.8 billion during
July-December, FY2018 as compared to Rs
Within tax revenues, federal and provincial tax 497.4 billion in the comparable period of
revenues posted a growth of 16.0 percent and FY2017.
21.1 percent respectively during the first half of
FY2018. Of total federal tax revenues, FBR tax The significant performance of development
revenues witnessed a significant growth of 17.9 expenditure was realized on account of
percent and stood at Rs 1,730.1 billion (5.0 increased spending under PSDP which rose to
percent of GDP) during July-December, Rs 558.8 billion during first half of FY2018
FY2018 against Rs 1,467.3 billion (4.6 percent from Rs 445.7 billion in the comparable period
of GDP) in the same period of FY2017. of FY2017, posting a growth of 25.4 percent.
Expenditures under federal PSDP amounted to
A strong recovery has been witnessed in non Rs 242.1 billion (net excluding development
tax revenues as it grew at 43.4 percent during grants of Rs 6.0 billion to provinces) while
58
 Fiscal Development
provincial government expenditures stood at In order to finance the fiscal deficit, domestic
316.8 billion during the first half of current and external resources generated Rs 412.2
fiscal year. billion and Rs 384.1 billion respectively during
July- December, FY2018. Of domestic sources,
Current expenditure grew by 13.5 percent financing from bank stood at Rs 331.8 billion
during July-December, FY2018 on account of and from non bank amounted to Rs 80.4 billion
12.4 percent increase in federal and 15.8 during the period under review.
percent rise in provincial government current
expenditures. In absolute term, current FBR Tax Collection (July-February,
expenditures increased from Rs 2,241.6 billion FY2018)
in first six months of FY2017 to Rs 2,545.2
FBR tax revenues grew by 8.2 percent to Rs
billion during the same period of current fiscal
3,367.9 billion during FY2017 against an
year. Under federal government current
expenditures, mark-up payment grew by 16.1 impressive growth of over 20 percent during
percent and amounted to Rs 751.4 billion FY2016. Accordingly, FBR tax to GDP ratio
during July-December, FY2018 against Rs reduced to 10.5 percent in FY2017 against 10.7
647.4 billion in the same period of FY2017. percent recorded in FY2016.

In addition, defence expenditure stood at Rs During the first eight months of current fiscal
393.4 billion during July-December, FY2018 year, FBR has been able to collect around Rs
against Rs 336.3 billion in the comparable 2,257.6 billion against Rs 1,921.7 billion during
period of FY2017, posting a growth of 17.0 the same period of FY2017, posting a growth
percent. of 17.5 percent. All the taxes have exhibited
positive growth during the period July-
During July-December, FY2018 subsidies February, FY2018. FBR annual revenue target
amounted to Rs 53.5 billion against Rs 58.3 for FY2018 has been fixed at Rs 4,013 billion
billion in the same period of FY2017 registered which requires a growth of around 19.15
a decline of 8.2 percent. According to the percent over and above the actual tax receipts
breakup of subsidies, power sector has
of Rs 3,367.9 billion generated during FY2017.
consumed Rs 36.7 billion during the first half
of current fiscal year against Rs 52.5 billion in Tax-wise details are presented in the following
the comparable period of FY2017, posting a Table:
decline of 30 percent.

Table 4.5: FBR Tax Revenues Rs billion

Revenue Heads FY2017 July-February % Change
Actual FY2017 FY2018*
A. DIRECT TAXES
Gross 790.6 893.4 13.0
Refund/Rebate 37.3 44.5
Net 1,344.2 753.3 848.9 12.7
B. INDIRECT TAXES
Gross 1,202.2 1,460.1 21.5
Refund/Rebate 33.8 51.3
Net 2,023.6 1,168.4 1,408.7 20.6
B.1 SALES TAX
Gross 791.3 955.0 20.7
Refund/Rebate 25.8 40.8
Net 1,329.0 765.5 914.2 19.4
B.2 FEDERAL EXCISE
Gross 108.3 121.2 11.9
Refund/Rebate 0.0 0.0
Net 197.9 108.3 121.2 11.9

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Pakistan Economic Survey 2017-18
Table 4.5: FBR Tax Revenues Rs billion
Revenue Heads FY2017 July-February % Change
Actual FY2017 FY2018*
B.3 CUSTOM
Gross 302.6 383.9 26.9
Refund/Rebate 8.0 10.5
Net 496.8 294.6 373.4 26.8
TOTAL TAX COLLECTION
Gross 1,992.8 2,353.5 18.1
Refund/Rebate 71.1 95.9
Net 3,367.9 1,921.7 2,257.6 17.5
*: Provisional
Source: Federal Board of Revenue

Direct Taxes natural gas, sugar, aerated water, cigarettes etc.

On the other hand, mineral fuels, vehicles
The net collection of direct taxes has registered
(other than railway), iron and steel, electrical
a growth of 12.7 percent during the first eight
machinery, plastic and articles, animal and
months of 2017-18. The net collection has gone
vegetable oils, organic chemicals etc
up from Rs 753.3 billion to Rs 848.9 billion.
contributed significantly to collection of sales
Bulk of the tax revenues of direct taxes is
tax from imports.
realized from income tax. The major
contributors of income tax are withholding tax, Federal Excise Duty
voluntary payments and collection on demand.
The collection of federal excise duties (FED)
Indirect Taxes during July-February, FY2018 has recorded
11.9 percent growth. The net collection has
Sales Tax
stood at Rs 121.2 billion during July-February,
The gross and net collections of indirect taxes FY2018 as against Rs 108.3 billion during the
have witnessed growth of 21.5 percent and 20.6 same period last year. The major revenue
percent respectively. It is accounted for around spinners of FED are cigarettes, cement,
62.4 percent of the total FBR tax revenues. services, beverages, natural gas and edible oil.
Within indirect taxes, net collection of sales tax
increased by 19.4 percent. The gross and net Customs Duty
sales tax collection during July-February, Customs duty collection has registered growth
FY2018 has been Rs 955.0 billion and Rs 914.2 of 26.9 percent and 26.8 percent in both gross
billion respectively showing growths of 20.7 and net terms respectively. The net collection
percent and 19.4 percent respectively. In fact, has increased from Rs 294.6 billion during
around 57 percent of total sales tax was July-February, FY2017 to Rs 373.4 billion
contributed by sales tax on imports during July- during July-February, FY2018. The major
February, FY2018, while the rest was revenue spinners of customs duty have been
contributed by domestic sector. Within vehicles, mineral fuels, iron and steel, electrical
domestic sales tax collection, the major machinery, plastic, edible fruits etc.
contribution came from POL products, cement,

Box: I- Major Initiatives taken by FBR

The comprehensive reform program covering major reform measures including both policy and administrative
measures has been discussed below:
Policy Initiatives
1. Tax Reform Commission (TRC)
The Federal Government in year 2014, constituted a Tax Reform Commission (TRC) in order to review and
rationalize direct and indirect taxes, rationalization of import tariff, review of autonomy and administrative

60
 Fiscal Development
structure of FBR along with creation of border force to deal with the illegal movement of persons and goods.
The TRC has submitted its recommendation to the Government about bringing reforms in FBR in February,
2015. The Government has constituted a high powered Implementation Committee headed by Advisor to the
Prime Minister on Revenue for reviewing the recommendations of TRC. In consultation with FBR, the TRC
has broadly divided its recommendations into long-term, medium-term and short-term categories. On the TRC
report the implementation committee is holding its meetings periodically in which recommendations of TRC
are being evaluated so that these could be implemented. Various recommendations of the TRC have been
accepted by the federal government by adopting various taxation proposals. The remaining proposals of TRC
are under consideration for the approval of the Federal Government.
2. Elimination of SRO Culture
In order to ensure level playing field for all taxpayers, SROs/concessions worth of more than Rs 290 billion
have been withdrawn during three years commencing from FY 2015. However, socially sensitive and essential
concessions have been retained and transposed to the relevant laws. Currently, under the law, FBR does not
have the power to issue any concessionary SROs. The power to issue SROs now rests with ECC of the Cabinet
under very limited circumstances.
3. Rationalization of Import Tariff and Corporate Tax Rates
To rationalize the import tariff structure and to reduce the general tariff slabs peak tariff slab of 30 percent was
reduced to 20 percent. The existing tariff slabs are 4, with the peak of 20 percent and base of 3 percent. In
order to promote tax culture and corporatization in the country it was decided to gradually reduce the tax rates
for corporate taxpayers other than banks in the following manner:-
Tax year 2013 35%
Tax year 2014 34%
Tax year 2015 33%
Tax year 2016 32%
Tax year 2017 31%
Tax year 2018 & onwards 30%
4. Benami Transaction Law
The Benami Transactions (Prohibition) Amendment Bill, 2016 has been passed by National Assembly and
Senate. This will help enable the authorities to curb transactions and holding of property in the name of others
to avoid proper incidence of tax.
5. Differential Taxation
The cost of business for non-filers has been significantly increased in the recent years. This step was taken to
encourage people to file income tax returns. Differential taxation for filers and non-filers has helped increase
number of filers from around 750,000 in FY2013 to more than 1.3 million in FY2017.
6. Adoption of CNIC as NTN
This initiative aims at facilitating individual taxpayer by absolving them to a large extent from cumbersome
process of registration. It will further help in documentation of economy and broadening of tax base.
Administrative Initiatives
Broadening of Tax Base (BTB)
For broadening of tax base FBR has taken several initiatives including use of third party data. Initially, the
objective was to register 300,000 new taxpayers in three years. The BTB drive has been successful. During the
years 2013-14 to 2016-17, FBR issued 513,468 notices and enforced 203,701 income tax returns. As a result of
these efforts the number of income tax return filers which was around 750,000 for the tax year 2012 has
exceeded to 1.3 million in the tax year 2016 and would further increase in coming years. To broaden the tax
net, different rates of adjustable withholding of income tax for the income tax filers and non-filers on certain
transactions have been introduced. This includes sales and purchase of immovable property, registration and
transfer of ownership of motor vehicle, cash withdrawal from banks and payment of profit on debt and
dividend income. The higher rates of tax for non-filers compel non-filers to file returns.

61
Pakistan Economic Survey 2017-18

BTB 4 Years Achievements

S.No. Period from July 2013 to 31st August 2017 Total
1 Notices issued u/s 114 of the Income Tax Ordinance 2001 547,008
2 Total Income Tax Returns Enforced 216,765
3 Tax paid with returns (Rs Millions) 5440.2
Current initiatives
(1) Taxation of real estate sector
i. Introduction of FBR valuation table against DC rates
ii. Imposition of WHT on transfer of immovable property
iii. Imposition of Capital Gains Tax
(2) Broadening of tax base: More than 216,765 returns have been enforced through policy and
administrative measures
(3) Change in Audit Policy and Parametric selection of Audit Cases for TY 2015
(4) Rationalization of Jurisdiction for Optimal Output: Corporate cases consolidated under corporate
RTOs/Zones and remaining jurisdiction organized on territorial basis
(5) Checks on fake invoicing through Sales Tax Real Time Invoice Verification System (STRIVe)
(6) Customized SAP application for ensuring proper monitoring of withholding sales tax from AG
Offices
(7) Establishment of tobacco enforcement network to counter illicit trade in cigarettes
(8) Tariff Rationalization – from seven slabs to four slabs with maximum tariff rate @20%
(9) International agreements on Exchange of Information
i. Signing of multilateral exchange convention (OECD)
ii. Bilateral Agreement with Switzerland on Exchange of Information Regime
(10) Benami Transaction Law passed by the parliament
(11) Enhancement of Digital/E-Library from different sources
(12) Online access of Law Library Portal for Direct Tax Law and Sales Tax Law
(13) Online Verification Services (Notices, Exemption Certificates etc)
(14) Launch of ADC payment System
(15) VOSS (Automatic Verification of Companies and Directors) at the time of registration with SECP
The above noted reform measures have started paying dividends. On one hand tax revenues improved
substantially, while on others, these reforms have brought significant improvements in the tax base. It is hoped
that tax-GDP ratio will increase to a reasonable level in the coming years.
Source: Federal Board of Revenue (FBR)

Provincial Budget percent higher than the revised estimates of Rs

Total outlay of all the provinces is estimated at 3,046.3 billion for FY2017.
Rs 3,548.7 billion for FY2018 which is 16.5
Table 4.6: Overview of Provincial Budgets Rs billion
Items Punjab Sindh Khyber Balochistan Total
Pakhtunkhwa
FY2017 FY2018 FY2017 FY2018 FY2017 FY2018 FY2017 FY2018 FY2017 FY2018
RE BE RE BE RE BE RE BE RE BE
A. Tax Revenue 1,168.0 1,384.7 595.0 733.0 336.2 387.5 189.5 210.0 2,288.7 2,715.2
Provincial Taxes 155.4 231.0 114.5 185.6 15.7 22.3 6.3 7.3 291.9 446.2
GST on Services (transferred
0.0 0.0
by federal Govt)
Share in Federal Taxes 1,012.6 1,153.7 480.5 547.4 320.5 365.2 183.2 202.7 1,996.8 2,269.0
B. Non-Tax Revenue 39.4 78.6 88.9 79.1 57.5 47.6 27.8 22.3 213.6 227.6
C. All Others 45.7 161.9 36.4 92.1 16.0 48.0 16.9 21.1 115.0 323.1
Total Revenues (A+B+C) 1,253.1 1,625.2 720.3 904.2 409.7 483.1 234.2 253.4 2,617.3 3,265.9
a) Current Expenditure 899.6 1,020.8 607.0 666.5 338.6 388.0 179.8 200.3 2,025.0 2,275.6
b) Development
532.5 635.0 248.7 344.1 172.1 208.0 68.1 86.0 1,021.4 1,273.1
Expenditure
Total Exp (a+b) 1,432.1 1,655.8 855.7 1,010.6 510.7 596.0 247.8 286.3 3,046.3 3,548.7
Source: Provincial Finance Wing, Finance Division.

62
 Fiscal Development

The proportion of current and development which is 19 percent higher than last year. While
expenditure in total expenditure is 64 percent non tax revenues are budgeted at Rs 227.6
and 36 percent respectively. Whereas the billion which is 7 percent higher than last year.
allocation under development expenditure is 25
percent and current expenditure is 12.4 percent Allocation of Revenues between Federal
higher during FY2018 over last year. Governments and Provinces
In accordance with the distribution of resources
Overall provincial revenue receipts estimated at
structured in 7th NFC award, the net transfers to
Rs 3,265.9 billion during FY2018 which is 24.8
the provinces are estimated at Rs 2,531.1 billion
percent higher than the revised estimates of Rs
for FY2018 which is 16.2 percent higher than
2,617.3 billion for FY2017. Tax revenues
the revised transfers of Rs 2,177.6 billion for
accounting for 83 percent of overall revenue
FY2017.
and estimated at Rs 2,715.2 billion for FY2018
Table 4.7: Transfers to Provinces (NET) Rs billion
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018
R.E B.E
Divisible Pool 1,063.1 1,117.5 1,287.4 1,476.6 1,751.5 1,996.3 2,269.0
Straight Transfer 145.6 103.5 124.4 97.4 100.4 125.1 115.2
GST on services - 83.7 1.5 0.7 0.1
Special Grants/ Subventions 53.9 61.2 53.8 33.7 32.6 23.4 26.0
Project Aid 47.8 71.3 85.2 61.9 60.2 77.9 177.8
Program Loans 4.6 4.2 59.1 18.1 29.6 15.9 9.0
Japanese Grant 0.1 0.0 0.0 0.0 0.0 0.1
Total Transfer to Province 1,315.0 1,441.5 1,611.5 1,688.4 1,974.3 2,238.5 2,597.2
Interest Payment 12.9 14.8 14.1 13.3 9.8 13.6 14.1
Loan Repayment 36.1 32.1 38.7 38.6 47.8 17.3 51.9
Transfer to Province(Net) 1,266.0 1,394.5 1,558.8 1,636.6 1,916.8 2,177.6 2,531.1
Source: Various issues of Budget in Brief.

Provincial Fiscal Operations targeted surplus of Rs 339.0 billion owing to

higher expenditures and slow pace in revenue
During FY2017, the provinces posted a
growth.
cumulative deficit of Rs15.9 billion against the
Table 4.8: Overview of Provincial Fiscal Operations Rs billion
July-December
Items FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2017 FY2018
A. Tax Revenue 1,197.1 1,365.7 1,596.2 1,744.5 2,145.4 2,287.6 1,012.9 1,270.2
Provincial Taxes 107.2 150.7 190.0 205.8 283.3 321.8 145.7 176.4
Share in Federal Taxes 1,089.9 1,215.0 1,406.3 1,538.7 1,862.2 1,965.8 867.1 1,093.8
B. Non-Tax Revenue 48.0 71.3 49.4 75.6 93.3 79.5 35.4 64.5
C. All Others 88.6 107.4 121.8 82.3 55.1 61.2 15.9 29.1
Total Revenues (A+B+C) 1,333.7 1,544.4 1,767.4 1,902.4 2,293.9 2,428.2 1,064.2 1,363.8
a) Current Expenditure 980.6 1,110.0 1,187.4 1,400.1 1,559.8 1,739.3 774.6 896.3
b) Development 375.4 371.5 430.5 498.8 592.4 852.2 247.4 316.8
Expenditure(PSDP)
Total Exp (a+b) 1,356.0 1,481.6 1,617.9 1,898.9 2,152.2 2,591.5 1,022.0 1,213.1
Source: Pakistan Fiscal Operations (various issues), Budget Wing

During FY2017, provincial expenditures Rs1,739.3 billion against Rs1,559.8 billion in

increased to Rs 2,591.5 billion against Rs FY2016. The growth in development
2,152.5 billion in FY2016, posting a growth of expenditure accelerated during FY2017 and
20.4 percent. Out of total expenditure, current stood at 43.8 percent to reach Rs852.2 billion
expenditures grew by 11.5 percent almost the compared to Rs 592.4 billion in FY2016.
same level recorded in FY2016 and touched
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Pakistan Economic Survey 2017-18
201
The growth in revenues slowed down during 6.6 percent during FY2017 and stood at Rs
FY2017 as compared with the preceding year. 2,287.6 billion against Rs2,145.4 billion in
Total revenues posted a growth of 5.9 percent FY2016. Under provincial tax revenues major
primarily due to decline in non tax revenues
reve contribution came from property
propert taxes followed
and slow pace in tax revenues. Tax revenue by Sales tax on Services (GST), Motor vehicles
(provincial tax and federal transfers) grew by tax and Stamp duties during FY2017.

Fig-4.7:
4.7: Provincial Tax Revenues

Provincial Taxes (Rs.billion) Share in Total revenues

400.0 15.0

300.0
10.0
200.0

322.0
283.3
5.0

205.8
190.0
100.0
150.7
107.2
64.6

0.0 0.0
FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017
Federal transfers to provinces grew by 5.6 against Rs 1,012.9 billion and Rs 35.4 billion
percent in FY2017. In absolute term, it respectively in the same period of FY2017.
increased to Rs 1965.8 .8 billion during FY2017
against Rs 1,862.2 billion in FY2016. The share On the other hand, expenditures touched 18.7
of federal transfers and provinces own revenue percent growth during the first half of current
receipts in total revenues remained at 81 fiscal year and stood at Rs 1,213.1 billion
percent and 13.3 percent respectively. against Rs 1,022.0 billion
llion in the same period of
FY2017. The rise in growth over preceding
Performance during July-December,
December, FY2018 year was largely stemmed from significant
increase in development expenditures compared
Provincial governments
vernments witnessed a better
to the rise in current expenditure.
fiscal performance during the first half of
current fiscal year. Against the target of Development expenditures grew by 28.0
Rs347.3 billion, all the four provinces percent relative to 15.7
7 percent growth in
generated cumulative surplus of Rs203.9 billion current expenditures during July-December,
July
against the surplus of Rs90.6 billion in the FY2018. In absolute term, development
comparable
able period of FY2017. Higher surplus spending stood at Rs 316.8 billion during first
was achieved on the back of healthy growth in half of FY2018 compared to Rs 247.4 billion in
total revenues that recorded at 28 percent to the same period of FY2017. While current
reach Rs 1,363.8 billion during July-December,
July expenditures amounted
ed to Rs 896.3 billion
FY2018 against Rs 1,064.2 billion in the during July-December,
December, FY2018 against Rs
comparable period of FY2017. 774.6 billion during the same period of
FY2017.
Within total revenues, both tax and non tax
revenues posted a significant growth of 25.4 Public Financial Management Reforms in
percent and 82.2 percent respectively. In the Federal Government
absolute term, tax revenue amounted to Rs
1,270.2 billion and non tax revenues stood at Rs The Ministry of Finance continues on the path
64.5 billion during July-December,
December, FY2018 to implement Public Financial Management
(PFM) reforms with the aim to improve upon a
sustainable fiscal policy, link government’s
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 Fiscal Development
strategic policies with the budget, and enhance responsibilities between different PFM
productivity of public expenditure to improve institutions.
delivery of public services. A PFM reform
strategy has been drafted that incorporates Conclusion
various elements of the PFM system. The The performance review of Pakistan’s fiscal
strategy envisages adoption of reforms over the sector reveals that there is a considerable
next 10 years focusing on administrative, improvement in fiscal accounts in recent years.
policy, legal, and systemic strengthening. The consolidated fiscal deficit that averaged 7.2
percent of GDP between FY2009 and FY2013
An important element of the PFM system, the
registered a decline to an average of 5.8 percent
Medium-Term Budgetary Framework (MTBF)
between FY2013 and FY2017.
reform has entered into its eight year of
implementation. Through this initiative, macro- In order to control unproductive expenditures as
fiscal projections and politically endorsed well as increasing revenues, the present
budget strategy paper form the basis of budget government has taken various measures in a
ceilings that are communicated to Principal challenging environment. The aim was to
Accounting Officers. The budget ceilings are generate additional fiscal space for expenditure
designed to enhance empowerment over budget on development and social safety net.
allocations as per the policy priorities of the Resultantly, total development expenditures
Ministries / Divisions. (excluding net lending) increased from 3.5
percent of GDP during FY2013 to 5.3 percent
In addition, performance orientation in the
of GDP during FY2017, particularly, Federal
budgeting and monitoring systems is providing
Public Sector Development Program (PSDP)
better understanding of productivity and use of
increased from Rs 348.3 billion (including Rs
resources to deliver public services. This year,
24.7 billion development grants to provinces)
policy and planning exercises are being carried
during FY2013 to Rs 733.3 billion (including
out with a selected number of Ministries /
Rs 7.8 billion development grants to provinces)
Divisions in order to better align service
in FY2017. While the allocation under BISP
delivery plans with the budgets. Furthermore,
(development expenditure outside PSDP) has
the technology-based planning and performance
also witnessed a substantial increase of 73
management system - known as ‘Business
percent to reach Rs121 billion during FY2018
Planning and Consolidation’ is being rolled
from Rs70 billion in FY2013.
across the federal government.
Fiscal sector continued to perform well during
An important component of PFM system is
the first half of current fiscal year. Strong
coordination between federal and provincial
growth in revenues relative to expenditures
governments, to ensure consistency and
helped in containing fiscal deficit to 2.3 percent
harmony in the fiscal policies of federal and
of GDP during first half of FY2018 as
provincial governments. There was a
compared to 2.5 percent of the corresponding
coordination mechanism through meeting of
period of last year.
finance secretaries. The Council of Common
Interest has approved establishment of The performance of fiscal sector is an
ministerial fiscal coordination committee to indication of this fact that home grown
strengthen the existing coordination programme of economic reforms particularly in
mechanism. The fiscal coordination committee the area of revenue mobilization and
has since been notified. expenditure management helped the
government to increase the tax revenues
To strengthen legal and regulatory framework,
together with increasing the development
a draft PFM law is being drafted. The purpose
spending. This will provide significant support
of the law is to provide legal force to the PFM
in achieving economic stabilization and
system in vogue and clarify roles and
unleashing higher economic growth.

65