In ongoing fiscal year: IMF forecasts Pakistan gross debt to be 71.4pc of GDP

ISLAMABAD: The International Monetary Fund (IMF) has projected an escalating general government gross debt for Pakistan, standing at 71.4 percent of Gross Domestic Product (GDP) during the ongoing fiscal year (FY2025).

However, the IMF’s assessment, published in its Fiscal Monitor on Wednesday from Washington D.C., shows that the government’s gross debt will continue to decline in subsequent fiscal years and was projected to touch 60.7 percent of GDP by FY2029. It also shows that the pension bill is going to witness an increase by 0.1 percent of GDP from 2023 to 2030. In terms of net present value, the pension bill will increase by 6.7 percent of GDP between 2023 and 2030.

Healthcare spending will also increase by 0.1 percent of GDP from 2023 to 2030. In terms of net present value, it will increase by 4.1 percent of GDP from 2023 to 2030. The gross financing needs were estimated at 22 percent of GDP in fiscal year 2024, and the debt-to-maturity period stood at 3.7 years.

Overall, the Fiscal Responsibility and Debt Limitation (FRDL) Act approved and amended by the parliament would continuously breach the limit envisaged, bringing it down to 60 percent of GDP. The FRDL was enacted during Musharraf-Aziz regime almost 18 years ago but the debt could not be brought down to the desirable limits. It’s ironic that parliament never raised any serious debate and bothered to take any stern action against the breach of the law.

The IMF’s Fiscal Monitor shows that the general government net debt would escalate to 65.6 percent of GDP during the current fiscal year (FY2025) against 63.5 percent in the last financial year (FY2024) ended on June 30, 2024. Pakistan’s General Government Net Debt would continue to decline and would be reduced to 56.9 percent of GDP by fiscal year 2029.

The fiscal framework of the country was deteriorating mainly because of persistent fiscal imbalance, as it was projected to hover around 6 percent of GDP during the ongoing fiscal year (FY2025) against 6.7 percent of GDP for the last financial year (FY2024) ended on June 30, 2024. Now it was projected under the IMF program that the fiscal deficit would be brought down to 3 percent by fiscal year 2028. It will be standing at 2.8 percent of GDP by fiscal year 2029.

The primary balance, which is calculated after interest repayments, will be improved and will be standing at 2.1 percent of GDP in the current fiscal year 2025 against 0.9 percent of GDP for the last financial year. The primary balance will be maintained at surplus up to 2 percent of GDP till end of FY2029.