Fiscal deficit: Government intends to borrow Rs1.9trn in Jan-Jul, NA told

The National Assembly was informed Thursday that Pakistan Tehreek-e-Insaf (PTI) government intends to borrow Rs1.9 trillion for financing its fiscal deficit during January to July 2020.

In a written reply to a question by Muhammad Afzal Khokhar during question hour, the Minister for Finance and Revenue said that the domestic debt is Rs0.8 trillion and external debt is Rs1.1 trillion.

He said the government borrowing requirement is dictated by the gap between revenue and expenditure. He said that government borrowing is also required for resource intensive infrastructure projects which facilitate economic growth and allow achieving social development goals.

In another reply, the minister said that the government indents to pay back $28.2 billion external debt and Rs12.261 trillion domestic debt during the period financial year 2019-20 to financial year 2022-23.

Answering to another question, the Minister for Finance and Revenue said that a total debt and liabilities increased by Rs10.33 trillion during FY19. However, he said that it is important to highlight that total debt and liabilities include government debt as well as borrowing of other sectors which is not the liability of the government of Pakistan such as private sector, banks, foreign exchange liabilities, etc.

He said that although total debt and liabilities of the country had exceeded the size of GDP at end June 2019, however, it is important to mention that total public debt stood at 84.8 percent of GDP, thus remaining below the level of 100 percent as observed at start of year 2000. Furthermore, he said that out of this increase of Rs10.33 trillion in total debt and liabilities, total public debt contributed Rs7.75 trillion during FY19.

He said that component wise break-up of Increase in total public debt is as; (i) Rs3.44 trillion was for the financing of fiscal deficit, (ii) Rs3.03 trillion was due to rupee depreciation and (iii) Rs1.28 trillion was due to increase in cash balances of the government and accounting policy relating to long-term bonds. Hence, actual borrowing of the government was Rs3.44 trillion during FY19, he said.

The minister said that government inherited extremely challenging macroeconomic situation marked by high fiscal deficits and debt levels. He said that the situation further exacerbated due to decrease in foreign exchange reserves which contributed to a sharp devaluation of Pakistani Rupee and inflationary pressure which in-turn led to a tight monetary policy stance significantly increasing the debt levels and servicing cost.

However, he said that government is taking various policy initiatives to address these challenges through a combination of greater revenue mobilization, rationalization of current expenditure and efficient/productive utilization of debt. He said that the government has started revamping the economy through structural reforms and stabilization measures such as broadening the tax base, reforming the Public Sector Enterprises (PSEs) and reducing the fiscal deficit, while ensuring that social safety net and development spending are not only protected but enhanced considerably. He said that as the economic growth revives and fiscal deficit is reduced, the reliance on additional debt will also decrease.

Answering a question, the minister said that a total of 105,100 tax defaulters and the amount of tax recoverable against them is Rs396.465 billion during last two years.

He said that the term "tax defaulters" has been interpreted as the taxpayers against whom tax demand (Income Tax, Sales Tax, FED) is outstanding despite lapse of statutory payment period and the tax demand is not paid as yet.

Parliamentary Secretary for Finance Zain Qureshi told the house that the inflation rate is being brought down as a result of series of measures which include non-borrowing from the State Bank of Pakistan. He rejected the impression that the government is considering to bring a mini-budget.

Parliamentary Secretary for Commerce Aliya Hamza Malik told the house that both Pakistan and Iran have conducted negotiations over the establishment of barter trade mechanism and promote cooperation in the fields of customs, agriculture and industry. She said exports are witnessing growth whilst imports have been reduced.

Minister for Communications Murad Saeed said that promoting tourism is top priority of the government. For this purpose, he said allocations are being made for the construction of access roads to the picturesque areas.