Saudi gift of $1.5b to Pakistan will cut budget deficit

23/07/2017 06:01 AST

Saudi Arabia’s gift of $1.5 billion to Pakistan as capital receipts in shape of grant in aid has been parked in the Pakistan Development Fund (PDF), which has now been used in fiscal 2016-17 for acquiring shares of two power projects; Rs64 billion has been paid to the government as non-tax revenue receipts.

This non-tax revenue receipt of Rs64 billion will help slashing the yawning budget deficit for the financial year that ended on June 30, 2017.

Now the remaining amount of Rs93 billion against a total parked amount of Rs157.198 billion or $1.5 billion has been lying with PDF which can be utilised for investing in any viable public or private sector infrastructure development projects in months and years ahead, said one top official of Finance Division.

“This treatment of Saudi Arabia’s gift is completely in line with the IMF’s definition to estimate the budget deficit and nothing wrong has been committed to understate the budget deficit for fiscal year 2016-17 ended on June 30, 2017,” one top official of Finance Division claimed on Wednesday.

However, one former finance secretary did not agree to the stance taken by Finance Ministry high-ups arguing that once this amount was booked as part of financing now it could be utilised as expenditure instead of government revenue as non-tax receipts.

Now the IMF should come forward and explain whether it could be termed as double counting or part of normal process for calculating the deficit, he further argued but wished not to disclose his name.

Saudi Arabia had given gift of 1.5 billion dollars or Rs157.198 billion to Pakistan during the financial year 2013-14 and the government had shown through fiscal operation published at the website of Finance Division as part of external grants by putting into PDF.

Finance Ministry’s top official, who is known as guru of fiscal data, said that this grant money was treated as part of capital receipts and placed as below the line item in order to finance the deficit.

He explained that this amount was not used to reduce the budget deficit for fiscal year 2013-14 rather it was treated as financing item.

He said that the IMF had scrutinised the gifted amount of $1.5 billion as at that time Islamabad was under the IMF funded programme of Extended Fund Facility (EFF). “We had satisfied the IMF team at that time because there was nothing wrong committed by the economic managers,” he argued.

The Gulf Today