ISLAMABAD: In an apparent attempt to conceal the worsening fiscal position, the government has declared a spending of Rs 212 billion as a statistical discrepancy aimed at nullifying the impact of lower-than-targeted revenue collection and excessive current expenditures.
According to a summary of fiscal operations for financial year 2015-16 that the Ministry of Finance released on Wednesday, there was a statistical discrepancy of Rs212.1 billion in budgetary books.
Statistical discrepancy means revenues and expenditures whose source and purpose are not known for the time being.
The International Monetary Fund (IMF) has called for vigilance in budget execution over such “large” statistical errors. Despite declaring the discrepancy, the government could not achieve its budget deficit target for the second consecutive year in 2015-16. It borrowed Rs979 billion from domestic sources and Rs370 billion from foreign lenders to plug the gap.
Receipts from the United States and the State Bank of Pakistan (SBP) fell short of targets whereas the government cut its development budget by Rs107 billion to make up for the revenue shortfall.
There is a clear indication that the government has deliberately declared the statistical discrepancy. In table one of fiscal operations, total expenditures of federal and provincial governments were Rs5.8 trillion. But in table three, the expenses were above Rs6 trillion in 2015-16 that ended on June 30.
It is for the second time that the discrepancy has swelled to that extent. Earlier, in 2013-14, it stood at Rs215 billion after $1.5 billion, declared as a gift from Saudi Arabia, was placed under this head.
During its first three years in power, the PML-N government has booked Rs605 billion as statistical discrepancy, five times more than the statistical errors of Rs117 billion shown in last three years of the PPP government.
Ministry of Finance spokesman Dr Shujat Ali did not respond to the query about the discrepancy. “The 2015-16 statistical discrepancy is not unprecedented in size internationally but is nonetheless significant and larger than in 2014-15,” said Tokhir Mirzoev, IMF Resident Representative in Pakistan. He called for vigilance in budget execution since the discrepancy, if reversed, could put pressure on this year’s deficit target.
Mirzoev said Pakistan had asked for IMF’s technical assistance to further strengthen its fiscal accounting and the lender planned to provide the assistance in coming months.
The Rs212-billion discrepancy occurred despite implementation of the multibillion-rupee Project to Improve Financial Reporting and Auditing, funded by the World Bank.
Independent economists are demanding that the government order a forensic audit of its fiscal affairs and present its books for examination to an independent commission comprising senior chartered accountants of reputed firms.
“The discrepancy is an accounting trick to understate last fiscal year’s budget deficit by 0.7% of gross domestic product (GDP),” commented Dr Ashfaque Hasan Khan, Dean School of Social Sciences and Humanities of National University of Science and Technology.
The government closed fiscal year 2015-16 at 4.6% or Rs1.35-trillion budget deficit against the target of 4.3%, reflecting a slippage of Rs57 billion.
Khan pointed out that the figures suggested that actual deficit stood at 5.3% of GDP or Rs1.56 trillion excluding the circular debt parked outside budget books.
Total revenue for 2015-16 amounted to Rs4.1 trillion against expenditure of Rs6 trillion. The revenue target of Rs4.3 trillion was missed by Rs232 billion.
Non-tax revenue target was short of Rs191 billion due to reduced receipts from the US and the SBP. Against the expected Rs154 billion, the US gave Rs107 billion in the Coalition Support Fund. SBP’s contribution stood at Rs227.9 billion against the projected Rs280 billion.
The government’s current expenditures also exceeded budgetary limits in 2015-16, though it cut overall expenses to Rs3.9 trillion by restricting development spending. Servicing of domestic and foreign debt consumed Rs1.26 trillion or 32.3% of total expenses.