Per person debt jumps to Rs302,000

Pakistan's per-person debt jumped at a double-digit pace to nearly Rs302,000 by end of the last fiscal year and the government could also not restrict the budget deficit to the prudent limit prescribed in an Act of the Parliament, according to the new Fiscal Policy Statement on Tuesday.

The budget deficit in the last fiscal year exceeded the legal limit by more than double or Rs4 trillion, showed the Fiscal Policy Statement-2025. As against the legal requirement to restrict the federal budget deficit to 3.5% of the gross domestic product (GDP), the deficit shot to Rs7.3% of the GDP or Rs7.7 trillion. However, it was slightly higher than the budget target.

According to the finance's ministry Fiscal Policy Statement for the National Assembly, the per capita debt burden increased from Rs271,264 in fiscal year 2023 to Rs301,954 in fiscal year 2024, showing an increase of Rs30,690 or 11.3%.

Law binds the federal government to submit the policy statement before the National Assembly by the end of January with the reasons for any violation of the Fiscal Responsibility and Debt Limitation Act of 2005. Both the finance minister and the finance secretary have certified the authenticity of the analysis and the figures reported in the statement based on the information available till January 7th.

This statement is presented to the National Assembly to fulfil the requirement of the Section 6 of the Fiscal Responsibility and Debt Limitation Act. The law stipulates that the federal government shall cause to be laid before the National Assembly a fiscal policy statement by the end of January each year.

The federal government violated the core principle of sound fiscal management by restricting the federal budget deficit to the legal limit. Ironically, when the finance minister presented the budget in June 2023, it was in violation of the law, as the federal deficit target had been set at 7.1% of the GDP.

The government conceded before the National Assembly that it violated the Fiscal Responsibility and Debt Limitation Act by not adhering to the legal requirement of restricting the budget deficit to 3.5% of the GDP in fiscal year 2024.

"Limiting the federal fiscal deficit excluding foreign grants to 4% of GDP during the three years, beginning from the financial year 2017-18 and maintaining it at a maximum of 3.5% of GDP thereafter," reads Section 3 (a) of the FRDL Act.

The total federal budget deficit remained at Rs7.7 trillion or 7.3% of the GDP –Rs4 trillion or 3.8% of the GDP higher than the legal limit, showed the report.

The total public debt also increased by nearly 15% in the last fiscal year. It jumped from Rs62.9 trillion to Rs72.3 trillion due to higher interest payments on debt and exchange rate depreciation effect. But in terms of size of the economy, the total public debt decreased from 74.8% in June 2023 to 67.2% in June 2024.

The report stated that the government expenditure also surpassed budget estimates due to a rise in mark-up payments, which remained 11.7% higher than the budget estimate. But the non-mark-up expenditure remained within the budget limits.

In the last fiscal year, the report stated, inflation receded and there was a surplus in the primary fiscal balance, a negligible current account deficit, and a stable exchange rate. The optimal policy mix, especially the fiscal consolidation and targeted subsidies, played a critical role in reviving the economy, it added.

But the current expenditures reached 105.5% of the budget estimates, driven primarily by increased mark-up payments due to high interest rate, according to the report.

The budget for the fiscal year 2024 estimated development expenditures at Rs1.14 trillion, however, actual expenditures decreased to Rs1.03 trillion because of Rs218 billion cut on the PSDP.

The finance ministry report stated that the total revenues observed a slight shortfall which contributed to the actual federal fiscal deficit of 7.3% of GDP against the budget target of 7.1% of GDP.