PMA Issues Public Finance and Public Debt Developments Report for Q2 of 2016
The PMA issued the Public Finance and Public Debt Developments Report for the second quarter of 2016. The report reviews the latest advances and developments in relation to government finances and performance over this period. It also presents an in-depth analytical account of public debt developments (both domestic and external), including arrears and their implications on the sustainability of public finance, and reviews the most significant indicators of public debt.
The report shows that public revenues and grants have increased during this quarter, compared to the previous quarter, despite a drop in revenues from both domestic revenue collection and foreign grants and aid, as the increase in clearance revenues was quite pronounced during that same period. Moreover, real public expenditure (less net lending) has increased notable during this quarter, in comparison with the previous quarter. The overall fiscal balance (after foreign grants and aid) realized a deficit of about NIS 8.3 million for this quarter, compared to a surplus of about NIS 725.8 in the previous quarter. This quarter has also witnessed the stabilization of public debt, domestic and foreign alike, in addition to the contraction in accrued government arrears for the same quarter.
During second quarter of 2016, public revenues and grants increased by about 6.9 percent, compared to the previous quarter to reach NIS 4.4 billion, as a result of a marked rise in clearance revenues by about 40.2 percent, in spite of the decline in domestic revenue collection by about 41.7 percent compared to the previous quarter ( tax revenues declined by about 38.3 percent and non-tax revenues by about 27.2 percent). Additionally, foreign grants and aid declined by about 1.4 percent, compared to the previous quarter.
Conversely, real public expenditure witnessed a notable increase by about 32.1 percent during the second quarter compared to the previous quarter, to reach NIS 4.4 billion. The increase was due to an increase in wages and salaries (by about 36.8 percent), non-wage expenditure (by about 36.6 percent) and development expenditure (by about 43.6 percent); while expenditure on net lending dropped by about 19.2 percent over the same period.
Developments of both sides of public finances (revenue and expenditure) produced an overall deficit before grants and aid of about NIS 606.7 million (the equivalent of 4.8 percent of GDP); while overall deficit after grants and aid reached about NIS 8.3 million (the equivalent of 0.1 percent of GDP).
On the other side, public debt saw a slight rise during the second quarter of 2016 by 0.1 percent, continuing to stand at previous-quarter levels of USD 2.5 billion, or the equivalent of 18.9 percent of GDP. This debt was divided into domestic public debt totaling USD 1,456.6 million (the equivalent of 10.9 percent of GDP) and external public debt, totaling USD 1,073.6 million (the equivalent of 8 percent of GDP), for the same period.
As for government arrears accrued during Q2 of 2016, these witnessed a marked drop to reach about NIS 35.2 million, compared to NIS 779.7 million during the previous quarter. This is attributed to the fact that the a large part of the significant increase in clearance revenues was used to pay off arrears of wages, salaries and earmarked payments. Taking into account that government accrued arrears are due and payable debt, the public debt ratio, including arrears, reached by end of Q2 of 2016 around 46.4 per cent of GDP, exceeding the permissible ceiling of 40.0 per cent set forth in the Palestinian Public Debt Law of 2004.
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