Debt Servicing Lead Budget Deficit to Soar up to Rs. 1.4 Trillion - Android

The federal budget deficit shot up to Rs. 1.4 trillion during the first half of the current fiscal year, clocking… Read More

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The federal budget deficit shot up to Rs. 1.4 trillion during the first half of the current fiscal year, clocking in at Rs. 1.4 trillion, which is equivalent to 3.1 percent of the country’s gross domestic product (GDP).

For this fiscal year, the government has set the federal budget deficit target at Rs. 3.43 trillion or 7.5 percent of GDP.

The center and provinces are set to meet this week under the banner of the National Finance Commission (NFC), reported Express Tribune.

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This happened despite a tight control over expenditures. The only main head of expenditure that remained out of control during the July-December period of the current fiscal year was the debt servicing cost that jumped 15 percent to nearly Rs. 1.5 trillion, the newspaper quoted sources in the Ministry of Finance.

The debt servicing cost has been constantly soaring due to increased borrowing needed to fill the gap between expenditures and revenue.

In the first half of the current FY, the government took loans worth Rs. 1.2 trillion to finance the deficit, which it blames on the higher share of provinces under the NFC.

The maiden meeting of the NFC would be held in the Q-block on Thursday, chaired by the Finance Minister, Dr. Abdul Hafeez Shaikh, and is likely to be attended by all provincial finance ministers, the newspaper said.

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It is likely that the meeting, discussions between the center and provincial governments on their fiscal positions, in light of the new targets being discussed with the International Monetary Fund (IMF), are likely on the agenda for the meeting.

The government is exercising tight control over the development and defense spending, which has helped contain the deficit despite a significant surge in debt servicing cost.

Defense spending amounted to Rs. 505 billion, which was 4.7 percent, which is Rs. 25 billion less than the same period last year. Development spending also shrank by 19 percent year over year.

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