In another economic downturn, it has been reported that the government debt was recorded at a whopping Rs40,279 billion. The ruling PTI has added Rs15,547 billion in the past 38 months of its tenure. The document issued by the State Bank of Pakistan (SBP) stated that the incumbent government added 62.86 percent to Rs24,732 billion recorded in August 2018. This is precisely because just like its predecessors, the ruling PTI too has used excessive borrowing for public spending. It must be noted that the internal debt alone rose by Rs9,677 billion. While the government should be implementing measures to curb the worrying growth, it has instead suggested amendments in the Fiscal Responsibility and Debt Limitation Act of 2005. One of these changes include allowing the federal government relaxation on conditions under which it may “depart from the principles of sound fiscal and debt management owing to unforeseen demands on its finances”.
Under the new amendment, the government will have the opportunity to take from the national kitty when it deems ‘necessary’ than what the earlier version had allowed for – to spend on unexpected needs, such as, national security reasons or natural hazards. The amendment has been proposed at a time when the public debt-to-GDP ratio alone is over 70 percent than the recommended 60 percent by law. Moreover, the foreign debt too has already exceeded Rs13.8 trillion barring the $3 billion Saudi lifeline and the $6 billion IMF programme that would see the first billion deposited in the SBP in the coming months. It is then safe to assume that the debt-to-GDP ratio, which is already in red, would go up to record levels.
The government needs to spring up in action to this faltering fiscal discipline. Prime Minister Imran Khan had after all called the rising debt problem of the country a ‘national security’ concern. It is then only apt for his government to devise strategies to curb the rise in national debt. The Federal Board of Revenue (FBR) has been doing a commendable job by achieving record numbers on revenue collection. It must be empowered to also bring tax evaders into the system and further boost revenues. The government should also take cuts on its expenditure where required. In the federal budget 2020-2021, debt servicing or interest of loans had amounted for the largest expense. It is then only wise for the ruling PTI to shelve unessential expenses and curb debt.