Pakistan budget deficit to hit highest level of history
Shares
ISLAMABAD - Due to a substantial shortfall in tax collection and rise in interest payments, Pakistan’s budget deficit is likely to reach a record PKR 2.7 trillion in the current fiscal year worth as much as 7% of the gross domestic product (GDP).
Earlier, the government had revised the upper limit of the deficit to PKR 2.39 trillion, 6.3% of the GDP against a target of 5.1% for the current fiscal year. The deficit is expected to exceed PKR 2.24 trillion making it the highest ever recorded.
Since the deficit is expected to rise, it is safe to say that the two mini-budgets have failed, as a rise in interest payments and a shortfall in tax collection are equal contributors to this. The FBR recorded a shortfall of PKR 345 billion as it has collected PKR 2.995 trillion against a 10-month target of PKR 3.35 trillion and it is highly unlikely to collect PKR 4.398 billion – the target for the current financial year.
Whilst expenditures continue to rise, the interest payment has been revised by the government to PKR 2 trillion. This has been done by the finance ministry owing to the depreciation of the Rupee. When the budget for the current fiscal year was set, the government had set aside PKR 1.62 trillion for interest payments.
Solely due to the devaluation of the rupee, the government will have to pay an extra PKR 380 billion in interest payment; Dollar had reached a record PKR 142 last month against Pakistani Rupee as compared to PKR 115 in April last year.
