ISLAMABAD
The Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel (BMP) has stressed the need for implementing structural reforms for good governance, curbing unproductive state expenditures, expanding the tax base, fostering public-private partnerships, and reallocating resources to critical sectors to stimulate sustainable growth, as the country is facing with daunting economic challenges, posing a serious threat to the viability of the industry.
The FPCCI former president and Businessmen Panel (BMP) Chairman Mian Anjum Nisar observed that it is imperative to understand that fiscal discipline cannot be achieved and sustained without initiating structural reforms.
In the 2023 budget, the government extended substantial subsidies and grants to loss-making entities, which, in turn, are not only failing to make positive contribution but are also incurring significant losses.
We must maintain fiscal discipline and establish controls to create fiscal space to extend relief to the masses.
Quoting the reports, he said that the budget deficit continues to grow, entangling Pakistan in an unrelenting cycle of debt.
Even if we exclude the impact of debt servicing, our revenues fall short of covering other expenses, implying that all these are met from borrowed funds.
At the close of the fiscal year (FY) 2022-23, Pakistan recorded a budget deficit of Rs 6.52 trillion, equivalent to 7.7% of the GDP, a slight decrease from the previous year’s 7.9% of GDP.
However, in absolute figures, the budget deficit surged by a substantial 24%, or Rs 1.26 trillion, within just one year.
Due to this bleak scenario, the primary balance registered a negative Rs 690 billion in FY 2023. Encouragingly, Pakistan achieved a noteworthy reduction of Rs 1.3 trillion or 67% year-on-year in its debt portfolio at the primary balance level during FY 2023. According to the Fiscal Operation reportthe primary deficit, which stood at 3.1% of GDP in FY2022, was reduced to a more manageable level of 0.8% of GDP in FY 2023. This improvement has created some fiscal room, and with continued efforts we can attain a primary surplus, representing the fundamental level of financial discipline.
It is encouraging to note that at the consolidated level, the government successfully attained an overall primary surplus of Rs 503 billion. However, by end of the third quarter of FY 2023, overall budget’s balance showed a negative figure of Rs 3.07 trillion. Yet, in the last quarter of FY 2023, primary surplus turned into primary deficit, with latter recording a primary deficit of Rs 1.1 trillion.
The budget deficit in last quarter of FY 2023 surged to nearly 112% of the cumulative figures from July 2022 to March 2023. Pakistan’s budget deficit for the initial nine months amounted to approximately Rs 3 trillion, but in Q4 FY23 alone, it registered a substantial increase of Rs 3.4 trillion. It’s worth noting that in the latest budget documents released in June 2023, revised estimate for primary deficit in FY23 was Rs 421 billion.
However, according to the Ministry of Finance’s recent update, there was a primary balance overrun of Rs 690 billion, marking an increase of Rs 269 billion, which is 64% higher than the revised estimates for FY 2023 shared earlier in June of the same year. Contrastingly, according to the budget document from the previous year, a surplus of Rs 153 billion was projected. This highlights the inadequacies in financial planning at ministerial level.
While many countries are implementing privatization policies for SOEs, Pakistan remains in debate over the issue without officially announcing any plans for disinvesting in such entities. Meanwhile, the government continues to inject substantial sums of money in the form of subsidies and grants each year to sustain the operations of these unprofitable entities. Pakistan’s Caretaker Prime Minister presided over an important meeting focused on restructuring Pakistan International Airlines (PIA) and directed relevant authorities to provide a comprehensive restructuring plan for the national airline. While the results of this plan and the recommendations put forth by authorities remain uncertain, it is clear that the mismanagement of fiscal affairs is imposing a significant financial burden on the country and its people, which can be ascertained from the recently issued Pakistan Fiscal Operations figures for the July 1 2022 to June 30, 2023.
Due to this bleak scenario, the primary balance registered a negative Rs 690 billion in FY 2023. Encouragingly, Pakistan achieved a noteworthy reduction of Rs 1.3 trillion or 67% year-on-year in its debt portfolio at the primary balance level during FY 2023. According to the Fiscal Operation reportthe primary deficit, which stood at 3.1% of GDP in FY2022, was reduced to a more manageable level of 0.8% of GDP in FY 2023. This improvement has created some fiscal room, and with continued efforts we can attain a primary surplus, representing the fundamental level of financial discipline.
