The country’s fiscal deficit has clocked in at 3.6pc of GDP (or Rs1,652billion) in 9MFY21 as compared to 3.8pc of GDP (or Rs1,686billion) in 9MFY20. It translates into a decrease of 2pc YoY during 9MFY21. While the overall deficit remained in check, the government has also managed to record a surplus in primary balance at 1pc of GDP (or Rs452billion), higher than agreed with the International Monetary Fund (IMF). CFA Syed Atif Zafar, a chief economist and director research at topline securities, says that the government financed Rs562billion (34pc) of the overall deficit through net external financing and Rs1,090billion (66pc) through net internal financing. All four provinces recorded budgetary surplus during 9MFY21, clocking in a cumulative surplus of Rs413billion. The chief economist adds that in 3QFY21, overall budget deficit sharply contracted by 26pc year-over-year (YoY) on the back of 13pc YoY rise in total revenues, while total expenditures remained largely unchanged. The financing of the deficit in the 3QFY21 was more skewed towards net internal financing (i.e. 79pc in 3QFY21 vs. 60pc in 1HFY21),” he says. Zafar expects Pakistan’s fiscal deficit to clock in at around 7.0-7.5pc of GDP in FY21 compared to 8.1pc of GDP in FY20. During the period under review the total revenues are up by 6p YoY in 9MFY21. The tax revenues increased by 5pc YoY during 9MFY21. However, Petroleum Levy is now classified as a non tax revenue, and adjusting for this tax revenues are up by 11pc YoY. The direct taxes and sales tax (federal) have increased by 9pc YoY and 14cp YoY, respectively. The Non-tax revenues have increased by 12pc YoY, however adjusting for Petroleum Levy, the same is down by 12pc YoY as surplus profit from the State Bank of Pakistan (SBP) has dropped by 22pc YoY. The total Expenditures are up by 4pc YoY in 9MFY21. The current expenditures have increased by 8pc YoY during 9MFY21, where Mark-up Payments were up 12pc YoY even though interest rates have sharply come down. “We believe this is largely owing to realization of coupon payments on PIBs sold during 1QFY20 and higher borrowing,” Zafar says. Whereas, the government expenditures (current minus markup and defense) increased by 9pc YoY during 9MFY21, however defense expenditures have come down by 2pc YoY. The development expenditures and net lending also remained contained at Rs723bn, down 7pc YoY.