ISLAMABAD(WNAM Monitoring): A new International Monetary Fund report showed that Pakistan is set to miss this fiscal year’s budget deficit target by approximately Rs1 trillion, as the global lender anticipates the country’s increased reliance on loans in the coming years.
The IMF released the report from Washington on the same day Pakistan’s finance minister sought assistance from the United States for “debt financing”.
The Fiscal Monitor report of the IMF indicated that the gap between expenditure and revenues may remain at 7.4% of the Gross Domestic Product (GDP) for the fiscal year 2023-24 ending in June. This figure is nearly Rs1 trillion or 1% of the GDP higher than the deficit limit approved by the National Assembly.
Despite the successful completion of the $3 billion IMF programme, the government is expected to miss the budget deficit target. Last year, the IMF forced Pakistan to amend the budget after its presentation in the National Assembly to make it more realistic. Yet, the target of 6.5% of the GDP or Rs6.8 trillion is projected to be missed by Rs1 trillion, necessitating additional borrowings from banks.
The IMF report forecasts that during the next fiscal year, Pakistan’s budget deficit may hover around 7.3% of the GDP — a level deemed unsustainable and likely to increase the country’s debt burden.
Furthermore, the Fiscal Monitor report suggests that Pakistan’s overall budget deficit from fiscal year 2024 to 2029 will remain in the range of 5.8% of the GDP.
The widening gap between expenditure and revenues has left the federal government at the mercy of commercial banks.
Due to the IMF’s policy of completely closing the central bank borrowing window for the federal government, commercial banks are now fully exploiting the federal authorities. With the budget deficit consistently exceeding 7% of the GDP, the central bank is indirectly lending to the federal government through commercial banks, leading to increased government borrowing costs.
Interest payments are estimated to range between Rs8.3 trillion to Rs8.5 trillion during this fiscal year, significantly surpassing the projected net income of the federal government and the single largest expenditure.
