Karachi [Pakistan], In a fiscal year marred by record borrowing and rising debt servicing costs, the Pakistani government faces substantial financial challenges as it navigates through economic uncertainties and inflationary pressures, Dawn reported.
"Government borrowing in the first 11 months of the outgoing fiscal year exceeded the combined figure of the previous two fiscal years," economic data revealed, highlighting the magnitude of financial commitments.
This considerable borrowing, which amounted to PKR 7.39 trillion from July 2023 to June 7, 2024, exceeds the government's collective borrowings of PKR 7.16 trillion in the previous two fiscal years (FY23 and FY22).
Bankers speculate that total borrowings for FY24 could reach PKR 8 trillion by June 30, driven by high spending necessitated by development budgets cut to cover other expenses.
The impact of this extensive borrowing is profound and limits the government's ability to allocate funds to critical development projects. Instead, a significant portion of tax revenue goes toward debt servicing, a trend that is expected to increase in the next fiscal year, as Dawn reported.
"The government would spend PKR 7.21 trillion on domestic debt servicing and an additional PKR 1.04 trillion on external debt servicing, bringing the total to PKR 8.25 trillion," according to the document. budget for fiscal year 2023-24. This figure is expected to rise further in FY25, with allocations totaling PKR 9.77 trillion for debt servicing alone.
Amid projections of higher revenue generation, economic experts remain skeptical about achieving ambitious tax collection targets. "Economics experts believe the government will miss the PKR 12.97 trillion tax collection target set for FY25," citing concerns over missing previous targets, including the PKR 9.41 trillion target for FY24.
Crucially, high interest rates, recently reduced but still hovering around 20.5 percent, have polarized opinions within the business community. "The business community also considers this rate to be high and demands that it be reduced close to the inflation rate," as inflation levels stood at 11.8 percent in May, prompting calls for rates to be lowered. interest rates were reduced to 13-14 percent.
"This excessive borrowing virtually makes it impossible for the government to spend money on development projects," lamented a banker, highlighting the imbalance between public sector investments and private sector participation, Dawn reported.
"Government borrowing in the first 11 months of the outgoing fiscal year exceeded the combined figure of the previous two fiscal years," economic data revealed, highlighting the magnitude of financial commitments.
This considerable borrowing, which amounted to PKR 7.39 trillion from July 2023 to June 7, 2024, exceeds the government's collective borrowings of PKR 7.16 trillion in the previous two fiscal years (FY23 and FY22).
Bankers speculate that total borrowings for FY24 could reach PKR 8 trillion by June 30, driven by high spending necessitated by development budgets cut to cover other expenses.
The impact of this extensive borrowing is profound and limits the government's ability to allocate funds to critical development projects. Instead, a significant portion of tax revenue goes toward debt servicing, a trend that is expected to increase in the next fiscal year, as Dawn reported.
"The government would spend PKR 7.21 trillion on domestic debt servicing and an additional PKR 1.04 trillion on external debt servicing, bringing the total to PKR 8.25 trillion," according to the document. budget for fiscal year 2023-24. This figure is expected to rise further in FY25, with allocations totaling PKR 9.77 trillion for debt servicing alone.
Amid projections of higher revenue generation, economic experts remain skeptical about achieving ambitious tax collection targets. "Economics experts believe the government will miss the PKR 12.97 trillion tax collection target set for FY25," citing concerns over missing previous targets, including the PKR 9.41 trillion target for FY24.
Crucially, high interest rates, recently reduced but still hovering around 20.5 percent, have polarized opinions within the business community. "The business community also considers this rate to be high and demands that it be reduced close to the inflation rate," as inflation levels stood at 11.8 percent in May, prompting calls for rates to be lowered. interest rates were reduced to 13-14 percent.
"This excessive borrowing virtually makes it impossible for the government to spend money on development projects," lamented a banker, highlighting the imbalance between public sector investments and private sector participation, Dawn reported.
