The detailed statistics on the fiscal operations by the federal and the provincial governments have recently been released by the Federal Ministry of Finance.

The outcome of the operations has sometimes been referred to as inadequate because of a big shortfall in federal tax revenues collected by the FBR. The agreed target for these revenues was of Rs 12,970 billion in 2024-25, requiring a growth rate of as high as 40 percent. The actual collection was Rs 11,744 billion, implying thereby a big shortfall of Rs 1,226 billion, equivalent to 9.5 percent of the target and 1.1 percent of the GDP. Such a large shortfall has seldom been seen before.

However, the distinctly positive side of the outcome is that the budget deficit target of the consolidated operations was more than achieved. It had been set at 5.7 percent of the GDP in the targets of the IMF Programme for 2024-25. The actual outcome is a lower deficit of 5.4 percent of the GDP. Also, the primary surplus at 2.4 percent of the GDP is higher than the targeted level.

The contraction in the budget deficit is also sizeable. It was 6.8 percent of the GDP in 2023-24. This implies a big reduction of 1.4 percent of the GDP in only one year. Consequently, along with relatively stability in the value of the rupee, the central government’s debt to GDP ratio has remained, more or less, unchanged at close to 66 percent of the GDP in 2024-25.

The fundamental question is how, despite a big fall in the FBR revenues, the budget deficit target was more than achieved? The achievement of the targets could only have been possible with higher non-tax revenues and/or lower expenditures. In fact, this has been the outcome in both budgetary heads.

The non-tax-to-GDP ratio is higher than the original........

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