The country’s budget deficit in the first quarter of FY22 was 0.81 percent of GDP, compared to 1.1 percent in the first quarter of FY21 and 3.7 percent in the fourth quarter of FY21. Revenue collection increased by 0.11 percent YoY in 1QFY22, which drove the improvement.
On the strength of a solid performance by FBR tax collection, total tax collection increased by 37% YoY to PkR1.5 trillion. Non-tax income, on the other hand, fell by 23% YoY due to reduced petroleum levy collection as the GoP opted not to burden the public with additional costs in the face of rising international oil prices.
Total expenditures on the other hand reportedly declined by 0.14%YoY on the back of 16%YoY decline in debt servicing cost. However, 17%YoY growth in defense related expenditures contained the headline decline in current expenditures.
· Development expenditures at the same time grew by 23%YoY on the back of 53%YoY growth in federal PSDP which grew to PkR108bn as opposed to PkR71bn during SPLY.
· We expect FY22 to close with a headline fiscal deficit of 6.8% of GDP while the primary deficit likely clocking in at 0.8% of GDP. Risks to our macro forecasts come from higher than anticipated jump in debt servicing costs where we expect a cumulative jump of 125bps during remainder of FY22.