LAHORE: The Pakistan Industrial and Traders Association Front (PIAF) has called for keeping check on government expenditure and high cost of debt servicing to contain budget deficit, which has jumped to 7.9 percent of the GDP during the outgoing fiscal year.
Expressing serious concern over the high jump in country’s budget deficit – the gap between federal government income and its expenditures, PIAF Chairman Faheem Ur Rehman Saigol said the deficit has been recorded as Rs5.3 trillion during the year 2021-22, though the government had set the budget deficit target at Rs3.4 trillion for the current fiscal year.
The PIAF Chairman Faheem Ur Rehman Saigol, in a joint statement along with senior vice chairman Haroon Shafiq Chaudhary and vice chairman Raja Adeel Ashfaq, maintained that the failure to reform the tax system and increase revenue collection is a major factor behind heavy domestic and foreign borrowings by the government.
Quoting the figures, the PIAF Chairman said that Pakistan’s overall expenditures were recorded at Rs13.295 trillion in the last fiscal year as against the revenues of Rs8.035 trillion leaving deficit at Rs5.3 trillion. The Finance Minister soon after assuming charge in April this year had announced that budget deficit is expected to touch Rs5600 billion as against projected Rs4000 billion during the previous fiscal year.
He said that the primary balance, which is the difference between government’s revenue and its non-interest expenditure, recorded a deficit of over Rs2 trillion. Primary balance was in surplus of almost Rs82 billion, in first six months. However, the previous government had increased its expenditures, which pushed the country’s budget deficit to 7.9 percent of the GDP, which was also resulted in suspension of International Monetary Fund’s program but it has also widened the budget deficit to higher side. 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 interest worth of Rs2.828 trillion 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 running of civil government expenditures, Rs1.5 trillion as subsidy and Rs1.14 trillion as grants to others.
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 has increased massively during this period mainly due to high cost of debt servicing, which has jumped by more than 18 percent. The budget deficit is going up despite the government 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 by 18 percent to nearly Rs1.5 trillion, he said.