The All Pakistan Business Forum has asked the government to take immediate measures as Pakistan’s medium-term debt repayment capacity has been weakening due to government dependence on loans, increasing risks to country’s financial outlook.
APBF president Ibrahim Qureshi said that the government is mostly depending on non-tax revenue and borrowing to generate surplus budget, in an effort to keep deficit below 5.5 percent of the GDP during current fiscal year.
The government has recently revised the budget deficit target up to 5.5 percent of the GDP due to expected increase in expenditures after raising PSDP allocations ahead of general elections.
He said that Pakistan’s external debt and liabilities have already increased to $89 billion by the end of December and the figure is expected to significantly jump by the time the current fiscal year ends due to mounting external repayment and trade related obligations. He said that international agencies are also expecting no change in the country’s debt burden, stating that the overall debt-to-GDP ratio would remain at 69.7% – higher than the limit set by parliament for the government.
Ibrahim Qureshi said that surging imports have led to a widening current account deficit and a significant decline in international reserves despite higher external financing. FY 2017-18 current account deficit could reach 4.8% of GDP, with gross international reserves further declining in the context of limited exchange rate flexibility. This is equal to $16.6 billion – and far higher than $12.1 billion deficit that Pakistan has booked last fiscal year.
He said that the budget deficit is expected to widen to 5.5% of GDP this year, which is equal to almost Rs2 trillion and will be the highest in Pakistan’s history in absolute terms. The official target is 4.1% of the GDP or Rs1.48 trillion.
He expressed his serious concerns over the weakening of the macroeconomic situation, including a widening of external and fiscal imbalances, a decline in foreign exchange reserves, and increased risks to Pakistan’s economic and financial outlook and its medium term debt sustainability as mentioned by reports of WB as well as IMF.
He called on the authorities to strengthen fiscal discipline through additional revenue measures and efforts to contain current expenditure while protecting pro poor spending.
He emphasized the need for prudent debt management and caution in phasing in new external liabilities, and the urgency of tackling rising fiscal risks stemming from continued losses in public sector enterprises.
He said that the government had restricted the budget deficit at Rs797 billion (2.2 percent of the GDP) during first half of the current fiscal year. The country’s expenditures were recorded at Rs.3180 billion as compared to revenues of Rs2385 billion, leaving the deficit to Rs797 billion. The budget is feared to go beyond 5 percent of the GDP. The government has once again revised the budget deficit at 5.2 percent of the GDP (Rs.1883 billion) for the ongoing financial year.—INP