Pakistan’s Fiscal Crisis
PAKISTAN’S public finances are in a Ponzi game and have been so for several years. No metric captures this fact more starkly than interest payments on public debt as a percentage of net federal revenue.
Escalating Expenditures and Structural Issues
The fiscal pressure has been mounting over many years without serious attention or corrective action. Key political constituents such as traders continue to remain untouched, while the federal government’s bloated employee-related expenses continue to soar.
Political Budgetary Practices
On top of this, the two successive PDM governments since 2022 have loaded their budgets with political bribes via freebies for parliamentarians, the military, members of the judiciary, and the bureaucracy.
Provincial Expenditure and Oversight
Provincial budgeting, especially in the case of Punjab, records numerous projects under the head of ‘Chief Minister’s Initiatives’, raising questions about financial prudence and accountability.
Urgent Need for Fiscal Adjustment
To restore a semblance of fiscal order, Pakistan needs to make a substantial budgetary adjustment, reflecting the enormity of its challenges and addressing critical issues like public debt dynamics and pension liabilities.
Quality and Implementation of Fiscal Adjustments
As important as the quantum of the fiscal adjustment is the question of how it is achieved — the ‘quality’ of adjustment, which sectors are brought into the tax net, and how non-productive expenditures are curtailed.
Shortcomings of the Federal Budget
Despite aiming for a historic fiscal adjustment, the federal budget falls short on several fronts, relying on optimistic revenue projections and lacking a comprehensive reform vision.
Challenges Ahead
The federal budget for 2024-25 is criticized for its misplaced priorities, absence of reform impulse, and overambitious targets, casting doubts on its effectiveness and credibility amidst Pakistan’s deepening fiscal crisis.