KARACHI: The new government will spend Rs 3,950 billion on debt repayment during the fiscal year 2022-23 (FY23) beginning July 1.
In the new financial year, 56.4 percent of the total tax revenue will be for debt repayment. In FY13, the government expects to collect a total tax revenue of Rs 7,004 billion.
Debt repayment will be 43.87 per cent of the total revenue of Rs 9003 billion while it will be 41.6 per cent of the total receipts of Rs 9.5 lakh crore.
The gravity of the situation can be gauged from the figures provided in the budget documents released on Friday. The total development expenditure is about Rs 1,023 billion, which is much less than the size of the loan repayment.
The accumulation of debt is increasing every year, and more is being borrowed to meet the rising expenditure. However, the largest amount in the budget has been allocated to repay debt, making it impossible for every government to reduce it and increase development funds.
Although the size of the revenue and GDP is increasing, but with more development funds, the benefits in the public interest could not be achieved.
If the revenue challenges cannot be met through development, the fiscal situation is only going to worsen.
Economists predicted last year that net revenue receipts could only meet the debt service bill during the current fiscal year ending June 30, and all remaining expenditure heads, including the country’s defense needs, could be met through “borrowed” money. be fulfilled.
The budget paper states that revenue, expenditure, assets and liabilities may be affected by unforeseen events that are not included in the budget estimates. Budget documents said that could be the result of additional government commitments, increased public debt, refinancing difficulties, or more significant financial events. In addition, fiscal accounts are also vulnerable to international macroeconomic conditions such as changes in commodity prices and exchange rates.
With the current pace of depreciation of the rupee and a tighter monetary stance, net revenue receipts may consume maximum revenue in the current financial year only for paying debt payment bills. The devaluation of the rupee against the dollar was over 17 per cent in FY22.
The budget paper did not mention the possibility of further devaluation of the rupee in the next financial year. However, in the absence of support through dollar inflows, the rupee is undergoing deep devaluation during the new financial year as well. This will increase the debt in terms of Rs.
The current budget appears to be an attempt to satisfy the IMF on key matters relating to revenue collection, reduction in subsidies and attainment of fiscal discipline. In contrast, last year had an expansionary budget that resulted in industry-led GDP growth of 5.97 per cent in FY12 and a massive increase in imports.
“A lot will depend on global commodity prices as they look at Pakistan’s macros and the government can easily achieve its budgetary targets in FY23,” said Mohammad Suhail, CEO, Topline Research.
Though FY23 revenue collection target is set at 7tr (+17pc from FY22), achieving this target will be a challenge due to economic slowdown and lower collections from oil sales.
“Note that the tax collection from oil (sales tax, duty, petroleum levy) is around 22 per cent of the total tax collection. At present, the government does not collect any tax from domestic consumers despite the recent 40 per cent increase in pump prices. doing,” he said. ,
Published in Dawn, June 11, 2022