Pakistan has met three major fiscal conditions set by the International Monetary Fund (IMF) for the first quarter of this fiscal year by keeping budget consolidation on track. However, the Centre received only Rs57.5 billion, which represents 6% of the annual provincial grant, for national economic initiatives.
According to the finance ministry, three of the four July-September targets were met, but the combined fiscal operations summary showed that the pace of consolidation had slowed. This was due to an uptick in expenditure at the start of the third year of the governments at the Centre and in the provinces.
In June this year, an understanding was reached between the federal and the four provincial governments that the provinces would provide Rs1.035 trillion in cash grants to meet expenditures on security and nationally important projects. Despite this, the finance ministry reported that only Rs57.5 billion was received from the four provinces for the July-September period.
Punjab provided the largest portion at Rs32.5 billion, while Sindh gave Rs8.5 billion. The K-P government provided Rs12.7 billion, a province where the federal government imposed governor's rule last month. K-P had publicly linked the grants to a meeting with the imprisoned Leader of Pakistan Tehreek-e-Insaf, Imran Khan. Balochistan provided a cash grant of Rs3.7 billion.
The country met the primary budget surplus condition, and the Federal Board of Revenue (FBR) met its IMF target for the first quarter. Against a quarterly primary surplus target of Rs1.95 trillion, the federal government reported a surplus of Rs2.97 trillion, or 2.1% of gross domestic product (GDP). This higher surplus was primarily due to fully booking the annual central bank profit in the first quarter. However, the finance ministry noted that the central bank's profit fell sharply by 20%, or Rs495 billion, to a little over Rs1.9 trillion.
The four provinces collectively generated a cash surplus of Rs599 billion, exceeding the IMF target by Rs83 billion. While three provincial governments showed cash surpluses, Balochistan ran a budget deficit in the first quarter. The federating units generated Rs301 billion in tax revenues, missing the IMF target by Rs88 billion.
The FBR collected Rs3.089 trillion against a three-month revenue target of Rs3.03 trillion, exceeding the target by Rs60 billion. However, after September, the FBR began facing a revenue shortfall and was Rs95 billion in deficit for the first four months of the fiscal year.
Non-tax revenues of the five governments amounted to Rs2.6 trillion, which was Rs430 billion, or 14%, less than in the last fiscal year. The finance ministry identified the shrinking central bank profit as the key factor behind this dip. The government collected Rs382 billion in petroleum levy during the first quarter, which was Rs11 billion higher than in the last fiscal year.
In July-September, the four provincial governments spent about Rs1.8 trillion, with development spending reaching Rs1.34 trillion. Their total revenues stood at Rs2.4 trillion, of which Rs1.9 trillion came from their shares of federal taxes.
Punjab, with total revenue of Rs1.1 trillion, spent Rs785 billion and generated a surplus of Rs333 billion, though it recorded a statistical discrepancy of Rs13.2 billion. Sindh booked a cash surplus of Rs181 billion after spending Rs510 billion, and reported a Rs20 billion statistical discrepancy. K-P recorded a budget surplus of Rs102 billion with Rs414 billion in income and Rs312 billion in expenditures, and had a statistical discrepancy of Rs35 billion. Balochistan spent Rs191 billion in three months and ran a Rs16 billion budget deficit.
On the expenditure side, the federal government spent a total of Rs3.1 trillion during the first three months, with only Rs81 billion allocated to development expenditures. The federal government paid Rs1.7 trillion in interest costs, an increase of Rs322 billion, or one-fourth, from the previous year. Defence spending amounted to Rs495 billion. After distributing the provincial share, the federal government's net income stood at Rs3.8 trillion, mainly because of booking the entire central bank profit in the first quarter.
Finance Minister Muhammad Aurangzeb stated that the IMF board is tentatively scheduled to meet next month to approve loan tranches worth $1.2 billion.
