The government has revised downward its overall fiscal framework in view of expected revenue shortfall faced by the Federal Board of Revenue (FBR) during the current fiscal year. In a crystal clear objective under the stringent IMF conditionalities, the main focus of the government is maintaining the budget deficit within the agreed limit with the Fund as both sides are striving hard to restrict this budget deficit in the range of 5.8 percent of GDP on June 30, 2014 against 8.8 percent of GDP in last financial year 2012-13.
The FBR’s target was slashed down from Rs 2475 billion to Rs 2345 billion for the current fiscal year, bringing down the target by Rs 130 billion. Finance Minister Ishaq Dar had argued that soon after assuming reins of power on eve of the last budget their government had allocated bloc allocation of Rs 115 billion into the Public Sector Development Program (PSDP) and linked its release with materialization of the FBR’s desired target. As the FBR has been facing a revenue shortfall of Rs 100 billion in first eight months so this bloc allocation of Rs 115 billion also became irrelevant in view of new realities emerged on fiscal front.
The FBR has so far collected Rs 1363 billion during July-February (2013-14) against Rs.1162 billion in the corresponding period of last fiscal year, reflecting a growth of 17 percent. The tax managers say that the FBR’s collection went up by 17 percent in the first eight months of the current fiscal year against a growth of 3 percent in last financial year. They also said that this year target of Rs 2475 billion could not be achieved because the baseline target was missed with huge margin as at time of budget making the FBR’s target was envisaged at Rs 2050 billion which materalized to the tune of Rs 1946 billion on June 30, 2013 so there was inbuilt shortfall of Rs 115 billion in envisaging the wishful target of Rs 2475 from day one.
Keeping in view this background, the Finance Minister stated that he put bloc allocation of Rs 115 billion into the PSDP amid knowingly that the FBR might not achieve the desired target.
In view of experience gained in Punjab, when the PML (N) led government won May 11 elections and presented the budget 2013-14 in haste so it created inbuilt cushion to adjust the FBR’s revenue shortfall without disturbing overall fiscal framework.
In order to avoid further slippages on fiscal front, the FBR will have to work hard to display its desired tax collection target on June 30, 2014. The FBR will have to collect Rs 982 billion in remaining four months (March-June) period in order to achieve revised tax collection target of Rs 2345 billion which seems to be an uphill task.
