ISLAMABAD: The interim government has made major revisions to this fiscal year’s budget, significantly increasing the federal budget deficit to a new record high of Rs8.54 trillion but cutting the external loans estimates by over $6 billion due to the non-materialisation of Eurobonds and foreign commercial loans.
On Tuesday, the Ministry of Finance released its new Annual Borrowing Plan, detailing the revised estimates of Pakistan’s growing gross financing needs for bridging the budget deficit and debt repayments.
The new report reveals that, compared to the Rs7.5 trillion federal budget deficit target approved by the last National Assembly, the Ministry of Finance has projected a record Rs8.54 trillion deficit for fiscal year 2023-24. This revised estimate is Rs1.03 trillion or 14% higher than the budgeted target and is equal to 8% of the size of the economy—a level considered highly unsustainable and already burdened by debt.
The revision was necessitated solely due to earlier under-reporting of interest payments and unrealistic estimates of foreign debt-related inflows. The Express Tribune reported last September that the Ministry of Finance understated the interest cost by over Rs1 trillion and over-projected the disbursement of foreign loans by around $4.5 billion.
The report shows that, against the budget estimate of Rs7.3 trillion cost on account of interest payments, the revised allocation under this head is Rs8.33 trillion—a slippage of Rs1.03 trillion or 14%. The cost of domestic interest payments has increased from Rs6.4 trillion to Rs7.4 trillion. Similarly, the allocation for interest payments on external loans has also increased from Rs872 billion to Rs998 billion.
As a result of these revisions, if all other expenditures remain constant, the size of the federal budget has now jumped to a record Rs15.5 trillion compared to the Rs14.5 trillion outlay approved by the last National Assembly in June 2023.
Prepared by the Debt Management Office of the finance ministry, the new Annual Borrowing Plan lays down the borrowing strategy of the government to meet its gross financing needs (GFN). The report underlines that the government will continue to engage with domestic and international investors to improve coordination and information disclosure.
Had the government listened to the debt office in June last year, it would have avoided the latest revision on account of debt servicing costs.
The ministry further stated that interest expenses during the first half of this fiscal year amounted to Rs4.2 trillion, with 88% attributed to interest on domestic debt.
For the current fiscal year, Pakistan’s gross financing needs are estimated at a record Rs25.5 trillion or equal to 24% of the Gross Domestic Product (GDP), significantly higher than the sustainable financing level estimated at around 15% of GDP for a developing country like Pakistan.
