The Pakistan Industrial and Traders Association Front (PIAF) has expressed serious concerns over the rising budget deficit and suggested a tight control on the government expenditures and high cost of debt servicing to contain it, reports WealthPK.

In a joint statement, PIAF Chairman Faheem ur Rehman Saigol, Senior Vice Chairman Haroon Shafiq Chaudhary and Vice Chairman Raja Adeel Ashfaq said the budget deficit has jumped to 7.9 percent of the GDP during the outgoing fiscal year.

Saigol said Rs5.3 trillion deficit was recorded during the year 2021-22, though the government has set the budget deficit target at Rs3.4 trillion for the current fiscal year.

They maintained that the failure to reform the tax system and increase revenue collection was a major factor behind heavy domestic and foreign borrowings by the government.

Quoting the figures, the PIAF chairman said Pakistan’s overall expenditures were recorded at Rs13.295 trillion in the last fiscal year as against the revenues of Rs8.035 trillion leaving the deficit at Rs5.3 trillion.

Finance Minister Miftah Ismail soon after assuming the charge in April this year announced that the budget deficit was expected to touch Rs5,600 billion as against the projected Rs4,000 billion during the previous fiscal year. 

He said the primary balance, which was the difference between government’s revenue and its non-interest expenditure, recorded a deficit of over Rs2 trillion.

The primary balance was in surplus of almost Rs82 billion in the first six months. However, the previous government increased its expenditures, which pushed the country’s budget deficit to 7.9 percent of the GDP, which also resulted in suspension of the IMF program and widened the budget deficit to the higher side.

The budget deficit has increased despite massive growth in tax collection and provincial governments’ surplus of Rs350 billion in the year 2021-22.

The Federal Board of Revenue has surpassed its annual tax collection target and fetched around Rs6,125 billion for the outgoing fiscal year 2021-22 ending on June 30, 2022. 

In expenditures, interest payment has once again increased massively, as it cost Rs3.182 trillion. The government has paid Rs2.828 trillion in interest on domestic loans and Rs353.8 billion on foreign loans.

Meanwhile, defence spending has remained at Rs1.4 trillion. The spending on development expenditures, including federal as well as provincial, remained at Rs1.6 trillion in the year 2021-22.

In other expenditures, the government has paid Rs541.9 billion as pension payment, Rs546.7 billion on civil government expenditures, Rs1.5 trillion as subsidy and Rs1.14 trillion as grants to others.

The PIAF chairman stated that Pakistan's fiscal policy continued to focus primarily on macroeconomic stabilization, in response to the financial crisis, instead of putting more emphasis on reforms to foster long-term growth through industrialization by adopting advanced technology. 

He claimed that the total government expenditure had increased massively during this period mainly due to the high cost of debt servicing, which had jumped by more than 18 percent.

The budget deficit is going up despite the government’s claim of tight control over expenditures, while the only main head of expenditure that remains out of control is the debt servicing cost that jumped to nearly Rs1.5 trillion, he said. 

Independent News Pakistan-Wealthpk