ISLAMABAD: The Federal Board of Revenue (FBR) has reduced government’s dependence on both the foreign and domestic borrowings. FBR achieved milestone by gradually and consistently increasing the total tune of revenue collection over last three years.
A well placed official source at FBR told Customs Today that FBR tax revenues had been increasing significantly during the last three fiscal years. For example, in 2012-13, the revenue collection was Rs1,946 billion which increased to Rs3,112 billion in 2015-16, registering an overall growth of around 60 percent.
Similarly, tax-to-GDP ratio which was below 9.8% of GDP in 2012-13 increased to 12.4%of GDP during 2015-16. Moreover, the development budget had been gradually and adequately raised in order to meet the investment requirements of a growing economy due to enhanced tune of revenue collection.
The source said that fiscal consolidation remained on track as fiscal deficit continued to fall for the fourth year in a row. Fiscal deficit was contained at 8.2% in 2012-13 (down from a projected 8.8%), due to the concerted efforts by the government soon after assuming the office.
Moreover, fiscal deficit was reduced significantly in 2013-14 and recorded at 5.5% of GDP (lower than its budgeted target of 6.6%) and recorded at 5.3% of GDP in 2014-15. Fiscal deficit was reduced further at 4.6% of GDP during 2015-16 supplemented by enhanced revenue mobilization and rationalization of non development expenditure” the source added saying that the government had set 3.8% fiscal deficit target for current year 2016-17 which would be further brought down to 3.5% of GDP by 2018-19.
Therefore, the source said that by increasing domestic revenues, the dependence on loans is reduced as the fiscal gap is narrowed. In this context, domestic resource mobilization strategy helped in achieving higher revenue growth and tax-GDP ratio in recent years. Federal PSDP gradually increased from Rs348.3 billion during 2012-13 to Rs.800 billion for 2016-17, showing a cumulative increase of over 129%.
Resultantly, the source added that economy continued to maintain growth momentum above 4.0% for the 3rd year in a row with real GDP growing at 4.71% in 2015-16 which was the highest in eight years. Economic growth is projected to continue its upward acceleration in the coming years.
As a result, the source observed that the cost of domestic borrowing had been substantially reduced as the weighted average interest rate on government domestic debt portfolio was reduced to a single digit as at end June, 2016. Accordingly, the government domestic interest expenditure is reduced to 26% of total revenue during 2015-16 as compared with 31% during the last fiscal year.