Debt costs wipe out Pakistan’s revenue, widen deficit in first half

By Staff Reporter

ISLAMABAD: Pakistan’s debt servicing bill soared by 64 percent to Rs4.219 trillion in the first half of the current fiscal year, wiping out the net revenue receipts of the federal government and forcing it to borrow more to finance its spending, official data showed.

The deficit rose to 2.3 percent of gross domestic product, or Rs1.812 trillion in the six months through December, from 2 percent of GDP, or Rs1.68 trillion, a year earlier, according to the Ministry of Finance’s fiscal operation report.

The debt servicing ate up the entire net revenue receipts of the government, which stood at Rs4.01 trillion after transferring Rs2.43 trillion to the provinces.

The government had to rely on domestic and foreign loans to cover its total expenditures of Rs9.2 trillion, which included Rs8.56 trillion of current expenditures and Rs0.152 trillion of development spending.

The fiscal deficit is expected to breach the target of 6.5 percent of GDP set by the International Monetary Fund (IMF) for the full fiscal year, as the second half usually accounts for 60 percent of the annual deficit, based on historical trends.

The government has pledged to the IMF to keep the primary balance, which excludes interest payments, in a surplus of Rs450 billion for the whole fiscal year. The primary balance posted a surplus of Rs1.81 trillion in the first half, a positive sign for the IMF-backed program.

The total revenues of the government amounted to Rs6.85 trillion in the first half of the current fiscal year, of which Rs 4.83 trillion came from taxes and Rs2.01 trillion from non-tax sources, including a petroleum levy of Rs0.472 trillion.

The tax collection by the Federal Board of Revenue (FBR) reached Rs4.46 trillion, while the provinces collected Rs0.365 trillion in taxes.

The major expenditure heads of the government included Rs0.757 trillion for defense, Rs0.404 trillion for pensions, Rs0.303 trillion for running of civil government, Rs0.375 trillion for subsidies, and Rs0.523 trillion for grants to provinces and others.

The statistical discrepancy, which reflects the difference between the financing and the deficit, was negative Rs0.128 trillion in the first half of the current fiscal year, compared with positive Rs0.90 trillion in the first quarter.