Pakistan Economy_Fiscal math on the mend, (AKD Daily, Feb 09, 2021)
AKD Daily
Pakistan Economy: Fiscal math on the mend
As per the official numbers released by Ministry of Finance (MoF), Pakistan's fiscal deficit clocked in at 2.5% of GDP in 1HFY21, marginally higher than last year (2.4% of GDP). More importantly, primary surplus stood at 0.74% of GDP (PkR337.2bn), showcasing improvement from last year's 0.69% of GDP (PkR286.4bn).
The increase in primary surplus was the product of, i) 5.6%YoY growth in FBR taxes which reached to PkR2.21trn, ii) 2.0x increase in collection under petroleum levy as Govt did not fully pass on the benefit of lower oil prices and higher MS/HSD (+8/13%YoY), iii) 8.5% reduction in defence spending, and iv) lower PSDP releases (35.7% of budgeted amount vs. 39.4% in the previous year).
While fiscal performance has remained satisfactory, providing confidence in Govt.’s ability to achieve revenue collection target of PkR4.96trn, yet it would end up with primary/fiscal deficits of 0.5%/7.0% of GDP, indicating that the path to fiscal consolidation will be tough and tedious.
From market’s vantage, Cements and Steel are likely to be the primary beneficiary of improved fiscal performance gaining from possibly higher PSDP releases in the near term.
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