Pakistan’s fiscal deficit for the 2018-’19 financial year reached a record level of 8.9% of the Gross Domestic Product, Dawn reported on Wednesday. This was higher than the 6.6% recorded in the previous financial year, and much above the government’s target of 4.9% at the beginning of the year, and 7.1% in June.
The fiscal deficit is the difference between the expenditures and revenues of the government. In Pakistan, the financial year begins on July 1 and ends on June 30 the following year.
The government’s revenues plummeted while expenditures rose in the 2018-’19 financial year, thus increasing the fiscal deficit, Dawn reported. A statement released by Pakistan’s Finance Ministry said the fiscal deficit stood at Pakistani Rs 3.445 trillion (Rs 1.55 lakh crore) the highest since 1979-’80. In 2017-’18, the deficit stood at Pakistani Rs 2.26 trillion (Rs 1.01 lakh crore).
Much of the increase in the deficit came in the April-June 2019 quarter. The fiscal deficit had stood at just 5% of GDP on March 31, but increased by 80% over the remainder of the financial year. The fiscal deficit rose steeply despite a 45% decline in development spending during the year.
“I have never seen such a high fiscal deficit in my career,” former Economic Advisor Asfaque Hassan Khan said. He added that the International Monetary Fund’s bailout programme for Pakistan contributed to a large increase in the deficit. “When interest payments go up, so does current expenditure and total expenditure,” Khan said.
On July 4, the IMF approved a $6-billion (approximately Rs 41,314 crore) loan to be disbursed over a period of three years to Pakistan. The loan will support Pakistan’s economic plan, “which aims to return sustainable growth to the country’s economy and improve the standards of living”, said IMF spokesperson Gerry Rice.
Pakistan has received billions of dollars in financial packages from China, Saudi Arabia and the UAE during the current fiscal year. In June, it secured a $3-billion bailout package from Qatar.
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