Pakistan’s budget deficit has widened to a whopping Rs2.26tn or 6.6% of gross domestic product (GDP) in the outgoing fiscal year (2017-18), the highest in five year term of PML-N government.
The PML-N government had revised the initial target of reducing the budget deficit from 4.1% of GDP to 5.5% for the outgoing fiscal year, but it failed to achieve both targets by a wide margin.
Three provincial governments also failed to present surplus budgets during the period under review.
After coming into power, PML-N government held out an assurance to the International Monetary Fund (IMF) to decrease fiscal deficit from 8% in 2012-13 to 3.5% within the next three years. In retrospect, the actual fiscal deficit ended up at 5.5% in 2013-14, 5.3% in 2014-15 and 4.6% in 2015-16.
A similar trend was witnessed in the FY 2016-17 when the country’s deficit went up to 5.8% against the target of 3.8%. During these years, expenditures and revenues were also significantly off target.
The summary of consolidated federal and provincial budgetary operations 2017-18 released by the ministry of finance said the major contribution to this historic fiscal deficit came from fiscal indiscipline of three provinces.
The highest deficit was booked by PPP-led Sindh government at Rs42.3bn followed by PML-N Punjab government with Rs6.6bn and PML-N-led Balochistan government also contributed its bit with Rs7.83bn.
PTI-led Khyber Pakhtunkhwa government emerged as the only province which posted budget surplus of Rs34.4bn in the outgoing fiscal year.
During the period under review, provincial expenditure also surged to 6% of GDP in 2017-18 against 4.8% of GDP four years ago in 2013-14. The armed forces spending reached to Rs1.03tn against the last year spending of Rs888bn, reflecting an increase of Rs142bn, or 16%. 
The defence expenditure amounted to 3% of GDP during 2017-18 relatively higher than 2.8% in 2016-17.
The federal government during the outgoing fiscal year managed to cumulatively borrow sums worth Rs2.26tn from external and domestic sources. Of these, the government obtained Rs785.2bn from external sources and ended up raising Rs1.47tn from domestic lenders.
Overall, total expenditure of federal and provincial governments clocked in at Rs7.488tn in 2017-18 against Rs6.8tn for 2016-17, reflecting an increase of 10%.
The total revenue slightly fell to 15.2% of GDP in 2017-18 from 15.5% of GDP last year.
Further analysis shows tax revenue improving to 13% of GDP in the outgoing fiscal year compared to 12.5% in 2016-17. On the other hand, total expenditure registered a restrained increase reaching 21.8% in fiscal year 2017-18 from 21.3% in the previous year. On the other hand, federal government expenditure increased to 12% of GDP in 2017-18 against 11% during previous year.
Development expenditure on the other hand slightly fell to 4.7% of GDP or Rs1.62tn in 2017-18 compared to 5.3% of GDP, or Rs1.69tn in 2016-17.
The GDP volume was posted at Rs34.39tn in 2017-18 compared to Rs31.86tn during 2016-17.
Total revenue in absolute terms was recorded at Rs5.228tn against Rs4.936tn same period last year, posting a 6% growth. Of these, tax revenue posted a remarkable growth of 20.8% rising to Rs4.467tn in 2017-18 against Rs3.969tn in the last fiscal year.