https://www.thenews.com.pk/print/552362-money-sent-property-purchased-abroad-not-illegal-fbr KARACHI: Pakistan’s public debt increased 4.59 percent to Rs33.247 trillion in the first quarter of the current fiscal year, central bank data showed on Thursday, mainly on the back of lower revenues and increased financing needs of the government.
Public debt stood at Rs31.786 trillion at the end of June 2019. The stock of government domestic debt rose 9.25 percent to Rs22.649 trillion till the end of September. However, external debt fell 4.13 percent to Rs10.598 trillion.
The rising financing requirements for the budget deficit, weak tax and non-tax collection, increase in the government’s expenditures and high interest payments on domestic front accelerated the pace of debt accumulation in July-September fiscal year 2019/20.
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Higher budget deficit increased the government’s reliance on borrowing from domestic and external sources. Though, the foreign debt of the government saw decline due to stable currency and contraction in the current account deficit.
A report published by the International Monetary Fund (IMF) last month said Pakistan’s public debt could surge this fiscal year to 78.6 percent of the total size of the economy.
The budget deficit is expected to be at 7.4 percent of gross domestic product. However, the State Bank of Pakistan sees budget deficit in the range of 6.5 to 7.5 percent of GDP in FY20.
The SBP, in its annual report for FY19, envisages a sizeable reduction in the deficit, by enhancing revenues and squeezing expenditures. But achieving the ambitious tax collection target in the middle of a broader economic slowdown may present a challenge.
The deterioration in government debt indicators is primarily an outcome of incomplete structural reforms in fiscal and energy sectors and weak public financial management, which has widened the resource gap for the government, according to the report.
“In particular, revenue deficit has steadily been increasing over the last 3 years, implying that the bulk of recent debt accumulation by the government was meant to finance its current expenditures, instead of adding to the repayment capacity of the economy,” the SBP report said.
Similarly, the increase in primary deficit has also contributed, as the government is increasingly falling short of resources to service even the existing debt stock, it added.
With rising debt burden and its costly servicing, it has become challenging for the government to create space for spending on infrastructure, human capital development, and social protection, which were crucial for developing a competitive economy while achieving sustainable growth, it noted.
(This news/article originally appeared in The News on November 8th, 2019)