Friday, December 01, 2023
ISLAMABAD: The International Monetary Fund (IMF) has forecast that Pakistan’s debt may swell to Rs82 trillion by the end of the current fiscal year ending on June 30 of next year, reported The News on Friday.
The IMF staff has also assessed that the pace of accumulation of total public debt and liabilities would continue to persist and may rise to Rs92.24 trillion in FY2024-25.
Last month, Pakistan and the IMF finalised a staff-level agreement by developing consensus on the Memorandum of Economic and Financial Policies (MEFP) which would be presented before the Fund’s Executive Board for the release of $700 million tranche under the $3 billion Standby Arrangement (SBA).
The agreed fiscal framework showed that the general government and government-guaranteed debt, including the IMF’s, was expected to end up at Rs81.836 trillion by the end of this fiscal year. The debt stood at Rs77.9 trillion till the end of September.
The total public debt and liabilities stood at Rs68 trillion in FY22-23. If the estimates prove to be right then it would mean that public debt and liabilities would increase by Rs11.8 trillion in the ongoing fiscal year.
The total public debt and liabilities would go up manifold mainly because of the rising fiscal deficit. The Fund estimated that the fiscal deficit would escalate by Rs8.227 trillion for the current fiscal year, equivalent to 7.8% of GDP.
Despite government efforts to convince the IMF to project lower debt servicing, the lender rejected the government’s point of view and projected the debt servicing on domestic and external loans would stand at Rs8.627 trillion for the current fiscal year.
In such a situation the government will have to manage budget financing of Rs7.5 trillion through domestic avenues while Rs1 trillion would be provided as budgetary support from foreign avenues. The IMF has also projected that debt servicing may go up to Rs9.621 trillion for the next fiscal year.
The subsidy amount was kept unchanged at Rs1.39 trillion for the current fiscal year despite the government only releasing Rs2.5 billion during the first quarter of the current fiscal year. The defence spending was also kept unchanged at Rs1.8 trillion for the current fiscal year.
On the fiscal side, the IMF and Pakistan agreed to cut down the development spending at federal and provincial levels.
At the federal level, the development spending was reduced from Rs843 billion to Rs782 billion for the current fiscal year. The government had allocated Rs950 billion for PSDP projects in the current fiscal year. For provincial-level development programs, the IMF has projected a reduction from Rs1,440 billion to Rs1,325 billion for the current fiscal year.
On the revenues side, the FBR’s target was kept unchanged at Rs9.415 trillion for the current fiscal year. On non-tax revenue side, the IMF and Pakistan agreed to jack up collection on petroleum levy from Rs869 billion to Rs918 billion for the current fiscal year.