The International Monetary Fund (IMF) published a new report on Wednesday in which they have said Pakistan’s public debt may increase this year to 78.6% of the total size of its economy, which is not only greater than the previous year but also against an act of the parliament which prohibits increase in debt beyond a threshold.
IMF further stated in their Global Financial Stability Report that the budget deficit-gap between revenues and expenditures would remain at a high level of 7.4% of the GDP, which is also slightly greater than the official objective predetermined by the Ministry of Finance. The increase in expenditures and the budget deficit would indicate that over 60% of the Federal Board of Revenue’s (FBR) taxes will be utilized in maintaining the debt, which increased at a very fast pace in the last fiscal year 2018-19.
“The public debt-to-GDP ratio will probably continue to high at 82.9% of the GDP in this fiscal year”, stated by World Bank.
The WB report observed that even in the next fiscal year, the public debt-to-GDP ratio would stay around at 80.8%, promoting Pakistan’s exposure to debt-related blows. The main reasons behind increasing public debt had been low revenues, greater debt, and defence spending and currency devaluation.
The Global Financial Stability Report estimated the budget deficit at 7.4% of the GDP, but that is 0.2% higher than the Ministry of Finance objective. But the IMF report indicated that the govt will attain its objective of main deficit reduction – total expenditures minus interest payments.
In meanwhile when the economic growth rate was descending every year it will be the tough task to gather that much additional amount in tax and non-tax revenues in a single year.
Adviser to PM on Finance Dr. Abdul Hafeez Shaikh last Sunday was optimistic and said the govt would attain its overall financial objectives as a result of a significant rise in non-tax revenues.
In opposition to the budgeted objective of Rs1.2 trillion, Shaikh expected to gather Rs1.6 trillion in non-tax revenues in this fiscal year. He further added that the federal budget deficit that had been noted at Rs738 billion or 1.9% of GDP in the first quarter of the last fiscal year, was reduced to Rs476 billion or 1.1% of GDP.