Just two budget categories—interest on debt and defence—consumed a massive portion of Rs. 2.2 trillion during the first five months of the current fiscal year, even surpassing the entire federal government’s net income. As a result, other spending had to be drastically reduced.
According to sources in the Ministry of Finance, the interest rate on the 50 trillion rupee stock of federal debt alarmingly increased by 83% between July and November of the current fiscal year.
According to the sources, the Ministry of Finance spent close to Rs. 1.7 trillion in interest costs, an increase of Rs. 763 billion or 83%.
In a similar vein, Rs. 517 billion was spent on defence in just five months, omitting costs for military pensions and the program to strengthen the armed forces.
According to the sources, it was Rs. 112 billion, or approximately 28% more than the prior fiscal year.
Defense and debt servicing expenditures combined remained at Rs. 2.2 trillion, or 107% of the federal government’s net income.
After giving the provinces their respective portions under the National Finance Commission award, the federal government’s net income was Rs. 2.04 trillion.
The Finance Ministry said nothing in response to this. The country is unable to find a solution to the debt trap and security situation, which is once again deteriorating rapidly due to the state’s poor policies, despite spending the entire net earnings on just two budget heads.
In the absence of an International Monetary Fund (IMF) safety net and any significant cash assistance from bilateral creditors, the likelihood of a government default is very high.
Only Rs. 119 billion was spent on development in comparison to large expenditures of Rs. 2.2 trillion on debt repayment and defence.
The amount spent on development is down by Rs. 133 billion, or 53%, from the prior fiscal year.
The total sum of the federal government’s other expenses, which were similarly decreased by Rs. 160 billion or 12%, was Rs. 1.15 trillion.
The government will fail the yearly primary budget deficit objective set with the IMF due to unchecked expenditure on debt payment and significant slippages against the annual circular debt reduction plan.
To read our blog on “Pakistan’s debt after 1Q of FY23 reaches to Rs. 62.4 trillion,” click here.
