IMF on public debt
The International Monetary Fund (IMF) in its report titled. “Global Front” has highlighted the issue of further surge of Pakistan’s public debt which will go up to 78.6 percent of the total size of the economy within the next four years. In other world the present government will be haunted by the implications of rising and unsustainable debt problem till the end of its tenure in 2023. In the past one year Rs.2 trillion plus have been added to public debt, exacerbating the debt servicing liability of cash strapped country.
The IMF report predicts gradual decline in fiscal deficit which would remain 7.4 percent of the gross domestic product in the current fiscal year. The budget deficit will decline to 5.4 percent in the next fiscal year, go down to 3.9 percent in FY 22, further drop to 2.8 percent in FY 23 and to 2.4 percent in FY 24.
The public debt and fiscal deficit combo will consume 60 percent of tax revenues which will go up from the existing 12.6 percent to 16.2 percent of the gross domestic products due FBR efforts for documentation of economy to broaden the tax base, improving tax compliance and withdrawing certain tax exemptions from the corporate sector. If the current expenditure remain rigid at 22 percent, and debt servicing consume two third of tax revenue then curtailment in development expenditure cannot be avoided. It remains to be seen how substantial growth target in tax revenue can be achieved. The FBR officials and independent economists are of the view that IMF target of revenue mobalisation of Rs.5.5 trillion may not be possible despite the expansion in the revenue base and improvement in tax compliance rate.