Easy come, easy go
Since there is no possibility that government will be able to increase income, the deficit will be bigger next year.
There is no real increase in the tax-base or tax collection visible on the horizon.
It is easy to spend money if it is not your own. It is also easy to spend money if it is ill-begotten. As they say, easy come, easy go.
The recently-departed government of the Pakistan Peoples Party has set all kinds of records for fiscal indiscipline. This has involved taking borrowing to over 60 per cent of the GDP, letting foreign direct investment fall to near historic lows, allowing the power crisis to balloon to never-seen-before proportions, and being totally incapable of solving the crippling problem of the circular debt.
So, with so many dubious distinctions, there was really no surprise when it emerged that the last government was also woefully unable to maintain any kind of a handle on spending.
According to the latest available figures, the government has managed to spend Rs1.68 trillion more than its income, in the first nine months of the current fiscal year, thus managing to reach the deficit target set for the entire fiscal year with three months to go.
The more depressing part is that just a small fraction of this was actually spent on development spending. The bulk of the expenditure was on interest payments or power subsidies. Actual development expenditure was just about Rs203 billion out of the total Rs2.25 trillion that the government spent in the first nine months of the current fiscal year. The fact that the government borrowed approximately Rs4.5 billion a day to feed this voracious spending means that any incoming government will be burdened with even bigger interest payments, leaving even less for development spending.
There is no real increase in the tax-base or tax collection visible on the horizon, with exports more or less stagnant, and with all the indicators showing that the State Bank of Pakistan will continue with its policy of monetary tightening to reduce bank lending to the government, there is no tangible possibility that the government will be able to increase its income. We can expect the deficit to be bigger next year.
Published in The Express Tribune, April 25th, 2013.
The recently-departed government of the Pakistan Peoples Party has set all kinds of records for fiscal indiscipline. This has involved taking borrowing to over 60 per cent of the GDP, letting foreign direct investment fall to near historic lows, allowing the power crisis to balloon to never-seen-before proportions, and being totally incapable of solving the crippling problem of the circular debt.
So, with so many dubious distinctions, there was really no surprise when it emerged that the last government was also woefully unable to maintain any kind of a handle on spending.
According to the latest available figures, the government has managed to spend Rs1.68 trillion more than its income, in the first nine months of the current fiscal year, thus managing to reach the deficit target set for the entire fiscal year with three months to go.
The more depressing part is that just a small fraction of this was actually spent on development spending. The bulk of the expenditure was on interest payments or power subsidies. Actual development expenditure was just about Rs203 billion out of the total Rs2.25 trillion that the government spent in the first nine months of the current fiscal year. The fact that the government borrowed approximately Rs4.5 billion a day to feed this voracious spending means that any incoming government will be burdened with even bigger interest payments, leaving even less for development spending.
There is no real increase in the tax-base or tax collection visible on the horizon, with exports more or less stagnant, and with all the indicators showing that the State Bank of Pakistan will continue with its policy of monetary tightening to reduce bank lending to the government, there is no tangible possibility that the government will be able to increase its income. We can expect the deficit to be bigger next year.
Published in The Express Tribune, April 25th, 2013.