The State Bank of Pakistan released a comprehensive report on the current economic situation in Pakistan and with regard to the working and efficiency of FBR. It said as the economy entered the 2nd half of fiscal year, the key challenges to macroeconomic management emanated from fiscal side and also the external sector.
After the surplus during the 1st half of FY13, the current account position is deteriorated to deficit in Q3FY13, resulting in pressure to the country’s foreign reserves. On the domestic front, growth in FBR tax revenue remains sluggish, while expenditure on power subsidies and debt servicing increased sharply.
Finally, the government had to resort increasingly to borrowing from SBP to finance its fiscal deficit. On a positive note however inflation fell significantly in Q3FY13, and large scale manufacturing showed some sign of recovery.
While growth in industrial sector increased with the support of broad-based recovery in large scale manufacturing construction and mining and quarrying while agricultural growth was adversely effected by heavy rains and localised floods during Khareef season.
Due to absence of coalition support fund (CSF) in Q3FY13, revenue growth slowed substantially to 9.7 present against 28.8 percent.
With FBR facing difficulties in achieving collection target, the combined share of non-FBR duties and levies on energy grew to 10.9pc of total revenues, up from 6.7pc last year. The government increased duties and charges (on various heads) and imposed a levy on LPG in Q3FY13.
Although the authorities set an ambitious growth target of 246.4pc in tax revenues for FY13, realised growth of 5pc in net tax collection during July and May FY13 was the lowest since FY02. Significantly against the revised target of Rs. 2043.4 billion, FBR could collect only 1335.2 billion at the end of March 2013 that was 65.5pc of the revised target. In disaggregated terms, while FED collection registered a nominal decline, growth in all other categories also declined. Slowdown in sales tax had a prominent contribution as this shortfall in FBR collection contributed significantly to the overall fiscal deficit in FY13, making revenue collection one of the most pressing fiscal issue.
