The All Pakistan Business Forum (APBF) has urged the government to exercise strict control over spending and the high cost of debt servicing to reduce the estimated budget deficit of Rs 4 trillion, or around 6% of GDP, for the current fiscal year, 2022–2023. APBF President Syed Maaz Mahmood noted that the one major expense category that is still out of control is the cost of debt servicing. He requested that the government change the macroeconomic and fiscal framework since it anticipates a significant increase in the budget deficit and primary deficit relative to the intended goals.

The government has set a target budget deficit of 4.9% of GDP for the current fiscal year, and it appears difficult to keep the budget deficit within the desired limits primarily due to challenges in meeting the fixed revenue target and reducing spending in the final months of the government’s term, he said. Maaz Mahmood observed that Pakistan’s fiscal deficit continued with old traditional practices as the development budget became the primary victim among the three major Ds on the expenditure front, including debt servicing, defence and development.

Due to the continued suspension of spending in the wake of devastating floods, the Public Sector Development Program (PSDP) could only use Rs 0.74 trillion in the first quarter of the current fiscal year. Citing the figures, he said that Pakistan’s budget deficit nearly doubled in the first quarter, reaching Rs 800 billion in the current fiscal year compared to Rs 430 billion in the same quarter of the previous financial year.

Despite a revenue surplus achieved by the provinces to the tune of Rs 215 billion as against 0.5% of the GDP in the same period of the previous financial year, the budget deficit as a proportion of GDP drastically increased and stood at 1% of GDP in the first three months of the current fiscal year, he added. In reaction to the financial crisis, the APBF President said that Pakistan’s fiscal policy continued to place a greater priority on macroeconomic stability than it did on changes that would promote long-term growth through industrialisation and the adoption of cutting-edge technology.

In the first quarter of the current fiscal year, the federal government’s budget deficit was Rs 1.02 trillion, and the provinces produced a revenue surplus of Rs 0.218 trillion, bringing the consolidated total budget deficit down to Rs 0.808 trillion, or just over 1% of GDP. APBF Chairman Ibrahim Qureshi expressing grave alarm over the substantial increase in the country’s budget deficit, said the primary deficit is currently estimated to reach a deficit of 2.5% of GDP, equivalent to Rs 2.15 trillion, against the aim of a surplus of Rs 150 billion.

He stated that one of the key causes of the government’s high domestic and international borrowing is its inability to modify the tax code and enhance revenue collection. According to Ibrahim Qureshi, the high cost of debt payment, which has climbed by more than 20%, is the key reason for the significant increase in overall government spending during this time.

Credit : Independent News Pakistan-WealthPk