KARACHI: The fiscal deficit for the first half of 2021-22 clocked in at 2.1 per cent of GDP versus 2.5pc a year ago, according to the latest update on fiscal operations that the Ministry of Finance released on its website.

In absolute terms, the overall deficit amounted to Rs1.37 trillion for July-Dec 2021. “It appears that for the calculation of the fiscal deficit as a percentage of GDP, new GDP numbers with the base year of 2015-16 have been used for July-Dec versus last year’s fiscal deficit that was on the old base (2005-06),” said a research note by Topline Securities on Thursday.

The government recently revised up the GDP number by about 16pc to Rs55tr for 2020-21.

Calculating the deficit for the first half of the preceding fiscal year on the basis of the new GDP number results in the balance of -2.1pc of GDP. This means the deficit as a percentage of GDP remained flat on a year-on-year basis at 2.1pc in the first half of the ongoing fiscal year.

The fiscal deficit equalled 1.5pc of GDP in the second quarter of 2021-22 versus 1.2pc a year ago using 2015-16 as base year.

Thanks to higher sales tax and customs duty, tax revenues grew 30pc on an annual basis to Rs3.1tr in the six-month period. The share of direct taxes in total tax collection declined to 32pc versus 34pc a year ago.

The brokerage reported that total expenditures in the period under review grew 19pc to Rs5.3tr led by an uptick in current expenditures, which rose 16pc to Rs4.7tr. Debt servicing remained flat at Rs1.4tr.

The primary surplus, which is the fiscal balance excluding interest payments, clocked in at 0.1pc versus 0.6pc in the same six months of 2020-21.

“The uptick in the fiscal deficit during the second half of the fiscal year (was) led by increased current expenditures as we expect the fiscal deficit of around 7pc for 2021-22,” the brokerage said.

Published in Dawn, February 11th, 2022