Islamabad: The continuous increase in fiscal spending of Pakistan has not only increased the budget deficit but also affected the socio-economic indicators.
Speaking to WealthPK, the Chief Economist of the Ministry of Planning, Development and Special Initiatives told WealthPK that despite the decline in inflation expectations due to factors such as lower inflationary pressure and lower global prices, concerns about the growing fiscal deficit remain. and the potential impact on Pakistan’s economic stability.
Total spending rose 49% to $7.532 trillion in the first seven months of this fiscal year, with current spending up 45%, mostly due to a sharp increase in bill payments. However, efforts to control unregistered expenditures have yielded positive results, leading to a significant increase in the primary surplus.
In the first seven months of this fiscal year, Pakistan’s fiscal deficit widened to 2.6% of GDP, up from 2.3% last year.
On the revenue side, net federal revenues grew by 57%, with a 105% increase in non-tax revenues. The Federal Board of Revenue (FBR) reported a 30% rise in net temporary tax collections due to increased tax regulations and economic activity.
Despite this positive revenue trend, the widening fiscal deficit reflects continued pressure on public finances, which requires the government to adhere to fiscal discipline through austerity measures and revenue mobilization efforts.
Speaking to WealthPK, the Joint Chief Economist of the Ministry of Planning, Development and Special Initiatives, Dr Aman Ullah Khan said that there is a moderate inflation outlook for March and April.
In addition, the positive development in the agricultural sector and the improved economic conditions in the main export markets are expected to contribute to economic growth,” he said.
Pakistan’s economic path is promising, with strong growth in agriculture and signs of recovery in the large manufacturing sector, with external support such as the $1.1 billion tranche with HPG.
However, addressing fiscal challenges and ensuring credit sustainability remains essential for long-term stability and growth.
Growing fiscal deficit compromises Pakistan’s economic stability
