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Thursday March 28, 2024

Fiscal woes in nine months of year: Pakistan’s debt servicing outstripsnet revenue

By Mehtab Haider
May 06, 2023

ISLAMABAD: Pakistan’s fiscal woes are multiplying daily, as the federal government’s fiscal position has turned negative after servicing domestic and extern loans and providing shares to the provinces.

Data shows that debt servicing ballooned to Rs3.58 trillion in the first nine months (July-March) of the current fiscal year till the end of March 2023 against the net revenue receipts of Rs3.4 trillion consuming the whole revenues. This makes it crystal clear that the federal government is left with no choice but to borrow to meet all other expenditure heads including defense, running of the government, payment of salaries and pensions, development and subsidies.

The expenditure overrun during the period has left the center with an empty kitty forcing it to borrow to the tune of Rs3.07 trillion to finance the yawning budget deficit of 3.7 percent of GDP in the first three quarters of the current financial year.

The country’s gross revenue receipts fetched Rs6.39 trillion during the period out of which the Center provided to the provinces share to the tune of Rs2.95 trillion under the NFC Award so the net revenue receipts stood at Rs3.44 trillion.

Debt servicing on both domestic and external loans consumed Rs3.58 trillion so the Center ran into deficit after fulfilling its two obligations — debt servicing and providing shares to the provinces.

Through the petroleum levy, the government has collected Rs362 billion in the first nine months of the current fiscal year.

The official data of the finance ministry shows that domestic debt servicing consumed Rs3.1 trillion, while foreign loans consumed Rs0.47 trillion in the first nine months of the current fiscal year. Defense spending remained the second largest ticket item on the expenditure front consuming Rs1 trillion in the first nine months of the current fiscal year.

Pension payment consumed Rs0.48 trillion, running of civil government Rs0.39 trillion, subsidies Rs0.52 trillion, grants to the provinces and others Rs0.68 trillion, and federal spending on the PSDP Rs0.32 trillion. There was a statistical discrepancy in the fiscal operation of the federal government to the tune of Rs0.12 trillion.

The fiscal operation for July-March period of FY2023 released by the finance ministry showed that the country’s total revenue fetched Rs6.9 trillion out of which tax revenues stood at Rs5.61 trillion and nontax revenues of Rs1.32 trillion in the first nine months of the current fiscal year. The federal government’s revenues fetched Rs5.15 trillion and provinces revenues stood at Rs0.41 trillion. Out of total nontax revenues of Rs1.3 trillion, the federal government fetched Rs1.21 trillion and provinces Rs0.10 trillion. Total booked expenditures crossed the mark of Rs10.01 trillion out of which the current expenditures stood at Rs9.24 trillion. Of the total current expenditures, the mark-up payments of total domestic and external loans consumed Rs3.58 trillion. The overall budget deficit of the federal government stood at Rs3.53 trillion. Statistical discrepancy in the first nine months stood at Rs0.28 trillion. The provinces threw surplus of Rs0.45 trillion so the overall budget deficit stood at Rs3.07 trillion, equivalent to 3.7 percent of GDP in the current fiscal year.