The ballooning budget deficit

Budget deficit persists as one of the biggest challenges for PTI-led government


Editorial February 22, 2019

At Rs1.03 trillion, or 2.7% of GDP, the budget deficit has hit a six-year high in the first half of the ongoing fiscal year, according to the fiscal operations data released by the Ministry of Finance.

The deficit widened despite a Rs87 billion reduction in development spending as against the Rs270 billion ceiling approved by the National Economic Council. The budget deficit, thus, persists as one of the biggest challenges the PTI-led government is faced with.

The government’s loose grip over debt and defence spending is mainly to blame for this widening difference between income and expenditure.

The two heads consumed a total of Rs1.36 trillion or 61.2% of the total federal expenditure. As per the break-up, defence spending in the first half of FY19 stood at Rs479.6 billion, up Rs86 billion or 22%, as compared to the figures in the corresponding period of FY18. Debt servicing, on the other hand, cost the exchequer Rs877 billion in the first six months of the ongoing fiscal, an amount higher by Rs126 billion or 17% in comparison with the figures in the same period of last fiscal year.

If the first half budgetary figures are any reference, it leaves little doubt that the PTI government is not going to meet its targets for FY19, and the overall annual budget deficit target of 5.1% of GDP or Rs1.95 trillion — approved by parliament in September last year — will remain elusive.

While there can be no compromise on defence spending and no escape from the cost of debt servicing at least in the near term, the government is not left with much room to go about bringing down the budget deficit.

The government has already done too much of fiscal tightening by way of cutting spending and imposing taxes, but the budget deficit crisis has grown stronger instead. While the government can ill-afford to go any harsher on the public purse, the options to enhance economic growth — the least painful way to cut the deficit — are far and few between. And that means tougher days ahead — both for the government and the people.

Published in The Express Tribune, February 22nd, 2019.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.

COMMENTS (1)

GKA | 5 years ago | Reply Suggest the following - cut education and health expenditure - reduce infrastructure spending - cancel all non military R&D programs - Cut back investment in agriculture and irrigation
Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ