As the International Monetary Fund (IMF) reportedly investigates the Pakistan Muslim League-Nawaz (PML-N) government’s claims of reducing the country’s budget deficit to 5.3% of the size of the national economy, official details of last year’s fiscal operations lend credence to suspicions that the shortfall was understated.The summary of consolidated fiscal operations in 2014-15 released by the finance ministry on Friday showed Rs177.6 billion as a ‘statistical discrepancy’. The ministry seemed not to know whether this huge sum was an expense or revenue but excluded it from expenditures, bringing the deficit down to 5.3% of the country’s gross domestic product (GDP) or Rs1.456 trillion.
The ministry also showed defence spending as Rs22 billion less than the revised defence budget of Rs720 billion even though the military has been engaged in ground and aerial offensives in the tribal areas since June 2014.The head of statistical discrepancy is supposed to deal with revenue and expenses whose source and purpose is not known for the time being. It seems the PML-N government, however, has used this head to understate expenses.
This is the second time statistical discrepancy has swelled to such a large extent. In 2013-14, the government had listed Rs156 billion ($1.5 billion) gifted by Saudi Arabia under the head. “The statistical discrepancy head was previously used for unknown expenses,” a finance ministry official confirmed. “But this time, the government is not sure whether to list revenue or expenses under it,” he said.
According to the official, the budget deficit amounts to Rs1.456 trillion or 5.3% of GDP when factoring in the borrowings made by the government. However, he added that the difference between expenses and solely the revenue comes in at Rs1.634 trillion or 6% of GDP.Independent economists had claimed that last year’s deficit, excluding circular debt payments, amounted to 6.4% of GDP.
The finance ministry has said that the discrepancy pertains to transactions between federal and provincial governments. When asked about the discrepancy, the IMF resident representative’s office did not respond.“There is no explanation of this statistical discrepancy of such a large magnitude. The country has the right to know what is behind this discrepancy”, said ex-finance minister Dr Hafiz Pasha.
Defence budget discrepancy
In another eyebrow-raising case, the finance ministry showed last year’s defence spending as Rs697.8 billion – Rs2.3 billion less than the original defence budget and Rs22.2 billion less than revised budget for 2014-15. This is all the more surprising considering the military has been involved in intensive operations in the tribal areas and the government, in the midst of war, cannot slash the defence budget.
Tax revenue discrepancy
The fiscal operations summary also shows a discrepancy on the revenue side. A finance ministry official had earlier stated that the State Bank of Pakistan had confirmed tax collection of Rs2.581 trillion against the Rs2.588 trillion claimed by the Federal Board of Revenue (FBR). However, the finance ministry used the FBR figure in the fiscal operations summary.
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