Keeping the record straight

Islamabad, January 08, 2018 (PPI-OT):In response to contentions made in a news report ”Pakistan Budget Deficit increases to Rs 826 billion”, carried by a section of media, the Ministry of Finance clarifies that fiscal deficit data is not compiled on monthly basis nor it reports on its website. The data is compiled on quarterly basis after receipt of required data from EAD, SBP and Provincial Governments with a time lag of almost two month. The month wise data is adjusted for compilation of quarterly fiscal operation data and then it is made for public and also placed on the Ministry of Finance website for dissemination. As first quarter fiscal operation data of the current year is available.

The article has referred five months 2017 data and drawing conclusions which is too early. Moreover, the article is contradictory in its statement that the development spending is increasing on political motivated developments schemes which is amounted to roughly Rs 180 billion, while on the other hand it has been narrated that development spending is significantly lower which should have been close to Rs 300 billion.

With regards to rising debt servicing which is the key reason for the increasing budget deficit. It is pertinent to mention that the article acknowledges the fact that the annual budget estimates for fiscal year 2017-18 are Rs.1,363 billion while debt servicing during July – November provisionally stood at Rs.625 billion. By presenting these numbers, the article negate itself as it is evident that debt servicing numbers during first five months of current fiscal year are in accordance with the budget estimates and are expected to remain within the annual budget estimates. Therefore, any claim that debt servicing is the reason for higher than budgeted fiscal deficit is not correct.

Moreover, debt servicing was recorded at Rs.647 billion during first half of last fiscal year, therefore, provisional debt servicing number of Rs.625 is not unusual keeping in view the expected growth in revenue and GDP during 2017-18 and is lower than the last year. It is also clarified with regard to reliance on short – term domestic and foreign borrowings has significantly increased the debt servicing cost. As opposed to claim, short term domestic loans entails lower interest rates, hence contributed less to debt servicing cost. The total Public Debt to GDP ratio recorded at 67.2 percent while total Government Debt to GDP ratio stood at 61.6 percent at end June 2017.

Pakistan witnessed a marginal increase of 1.4 percent (from 60.2 percent in 2013 to 61.6 percent in 2017) in its total government debt to GDP ratio during last four years while during the same period global debt to GDP ratio increased by about 8 percent (IMF World Economic Outlook). Furthermore, developed countries like USA, UK and Japan also carry debt and maintain levels as high as 80 to over 100 percent of their GDPs, well over Pakistan debt to GDP levels. Even in the developing country peer group, Egypt, Srilanka and India carry higher debt to GDP levels than Pakistan. Therefore, neither the number nor the context of the statement is correct with reference to debt to GDP ratio.

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