The government expenditure

Prime Minister Imran Khan speaking after inaugurating the Pakistan Railways Live Tracking System and Thal Express accused the previous two administrations of being responsible for the country paying 6 billion rupees daily as interest on loans procured. He added that debt has risen from 6 trillion rupees to 30 trillion rupees in 10 years.
The PPP-led coalition government (2008-13) was forced to take an International Monetary Fund (IMF) bailout package soon after it assumed power attributed to Musharraf-led government's political decision to heavily subsidise oil products which accounted for an unsustainable budget deficit. Granted that there were allegations of massive corruption and abuse of power during the PPP's five years; however total debt (domestic and external) was 6 trillion rupees in 2008 as per the Economic Survey (or 56.8 percent of Gross Domestic Product) and rose to 12.6 trillion rupees in 2012 (63.1 percent) or in other words, it was sustainable.
On the second last day of 2013 fiscal year, Ishaq Dar, the newly-installed finance minister, borrowed in excess of 400 billion rupees from the banking sector to retire the energy sector circular debt raising total debt and liabilities as a percentage of GDP to 73 percent for the year; and by June 2018 total debt and liabilities rose to around 29.861 trillion rupees or 86.8 percent of GDP, understated by around 6 trillion rupees due to the amended definition of debt by Dar in 2017.
The Khan-led administration has procured 6 billion dollars payable after one year to Saudi Arabia and the United Arab Emirates to pay off past loans (interest and principal as and when due) while details of the amount and interest rate applicable on borrowing of around 2.5 billion dollars from China have not yet been released. It is unclear yet how much of 6 billion rupee charges are due to the interest charges on these loans. Additionally, the government recently launched the Pakistan Banao Certificates at 6.25 and 6.75 percent for a three-year and five-year tenor, respectively, and the actual debt equity would depend upon the total amount of certificates sold though the returns are not payable for one year.
From the perspective of some independent economists, the PTI administration had no choice but to incur these loans to meet not only the unsustainable budget and current account deficits but also to shore up foreign exchange reserves. However, disturbingly, the foreign exchange reserves are down to around 8 billion dollars after procuring assistance from friendly countries, or less than two months of imports, reflecting the need for further loans which accounts for the government having decided in principle to seek a loan from the IMF.
Be that as it may, corruption almost certainly accounted for the failure of previous administrations to utilise development funds appropriately thereby creating a significant mismatch between allocations/disbursements and actual project construction on the ground with frequent delays in projects; however the main contributor to the rise in debt has been an unbridled current expenditure by the government. Revised estimates for current expenditure 2008-09 were 1649 billion rupees and by 2011-12 the figure was 2631.9 billion rupees. The PML-N's five years showed a massive rise in current expenditure - to 4298 billion rupees in 2017-18 - budgeted to rise to 4780 billion rupees in the current year though as this was a pre-election budget presented by the previous administration it was believed to be totally unrealistic.
The major components of the current expenditure are allocation for defence and running of civil government. Prime Minister Imran Khan has effected savings (in the Prime Minister's budget and that of some ministries) which must be appreciated yet the savings are small compared to what is required at this moment in time. One would hope that the PTI government focuses on reducing current expenditure which would require major sacrifices by the two major beneficiaries of this allocation for a year or two.
The government also needs to effect governance reforms, particularly in the power and tax sectors. This newspaper fully supports the need to have an integrated Energy Ministry; however, the PTI government has maintained the divided administrations of petroleum/gas, electricity and water by appointing separate ministers and ministers of state that accounts for the current gas crisis. It is unfortunate that the present government has been able to match the previous administration's performance with respect to mitigating the possibility of a gas shortage which indicates the need for the Prime Minister to revisit those dealing with this sub-sector in particular and the power sector in general.