ISLAMABAD:
Pakistan’s per capita debt rose at a double-digit pace to nearly Rs 302,000 at the end of the last fiscal year and the government also failed to restrain the budget deficit to the prudent limit prescribed in an Act of Parliament, according to the new Fiscal Policy Statement of the Tuesday.
The budget deficit in the last fiscal year exceeded the legal limit by more than double or Rs 4 trillion, the Fiscal Policy Statement-2025 shows. Contrary to the legal requirement to restrict the federal budget deficit to 3.5% of gross domestic product (GDP), the deficit soared to 7.3% of GDP or Rp 7.7 trillion. However, it was slightly above the budget target.
According to the Fiscal Policy Statement of the Ministry of Finance for the National Assembly, the per capita debt burden increased from Rs 271,264 in fiscal year 2023 to Rs 301,954 in fiscal year 2024, showing an increase of Rs 30,690 or 11.3%.
The law requires the federal government to submit the policy statement to the National Assembly by the end of January with the reasons for any violation of the Fiscal Responsibility and Debt Limitation Act of 2005. Both the finance minister and the finance secretary have certified the authenticity of the analysis and the figures reported in the statement based on the information available until January 7.
This declaration is submitted to the National Assembly to comply with the requirement of Article 6 of the Fiscal Responsibility and Debt Limitation Law. The law stipulates that the federal government must present a fiscal policy statement to the National Assembly by the end of January of each year.
The federal government violated the fundamental principle of good fiscal management by restricting the federal budget deficit to the legal limit. Ironically, when the finance minister presented the budget in June 2023, he violated the law, as the federal deficit target had been set at 7.1% of GDP.
The government admitted before the National Assembly that it violated the Fiscal Responsibility and Debt Limitation Law by failing to comply with the legal requirement to restrict the budget deficit to 3.5% of GDP in fiscal year 2024.
“Limit the federal fiscal deficit, excluding foreign subsidies, to 4% of GDP for three years, starting with the 2017-18 financial year, and maintain it at a maximum of 3.5% of GDP thereafter,” it states. reads in article 3 (a) of the FRDL. Act.
The total federal budget deficit remained at 7.7 trillion rupees or 7.3% of GDP – 4 trillion rupees or 3.8% of GDP above the legal limit, the report shows.
Total public debt also increased by almost 15% in the last fiscal year. It jumped from Rp62.9 trillion to Rp72.3 trillion due to increased interest payments on debt and the effect of exchange rate depreciation. But in terms of the size of the economy, total public debt decreased from 74.8% in June 2023 to 67.2% in June 2024.
The report states that public spending also exceeded budget estimates due to an increase in margin payments, which remained 11.7% higher than budget estimates. But unmargined spending remained within budget limits.
In the last fiscal year, according to the report, inflation receded and there was a surplus in the primary fiscal balance, a negligible current account deficit and a stable exchange rate. The optimal mix of policies, especially fiscal consolidation and targeted subsidies, played a key role in reviving the economy, he added.
But current expenses reached 105.5% of budget estimates, driven primarily by increased margin payments due to high interest rates, the report said.
The FY2024 budget estimated development expenditure at Rs 1.14 trillion; However, actual expenditures decreased to Rp 1.03 trillion due to the Rp 218 billion cut in the PSDP.
The Finance Ministry report stated that total revenues saw a slight deficit contributing to the actual federal fiscal deficit of 7.3% of GDP against the budget target of 7.1% of GDP.
