Budget numbers reveal how deep Pakistan’s financial crisis is

BY NIZAMUDDIN SIDDIQUI

BUDGET FOR 2024-25 EXPLAINED

Taxes, remittances, privatisation to provide less than 60pc of revenue

Borrowing will provide over 40pc of the funds needed

OFTENTIMES it seems the country’s media as well as economists make heavy weather of explaining federal budgets to the Pakistani public. Most news reports and analyses about the country’s budgets are so laden with technical terms and economic concepts that despite their best efforts most people fail to follow them properly. ‘So That’s The Story’ is striving to rectify this, by coming up with simple but innovative ways of explaining the Federal Budget for 2024-25 to even laypersons.

We will explain the state of affairs obtaining with regard to our economy through numbers as mentioned in reports and charts of daily ‘Business Recorder.

Let’s start this analysis with the Resources side of the budget. The important budget accounts that collectively reflect the true manner in which Pakistan’s economy is proposed to be run this year are Net Revenue Receipts (Tax and Non-Tax), Net External Receipts and Privatising Proceeds, Bank Borrowing, and Non-Bank Borrowing. Now, in order to determine the total funds to be raised through the efforts and resources of Pakistanis living inside the country or outside of it, we have to add the amount to be raised through taxation and non-taxation measures with the total obtained on account of Net External Receipts and Privatising Proceeds. Now, adding Rs10.37 trillion with Rs0.696tr we get Rs11.07tr.

In layman terms we can say the ‘entire national effort’ (including through taxes, remittances and privatisation proceeds) will raise a total of only Rs11.07tr at a time when the total budget outlay stands at a whopping Rs18.87tr. Calculating the percentages, we find that through what we have termed the ‘total national effort’ only 58.66 per cent of the total outlay will be raised.

Where will the rest of the required money come from? Through borrowing, where else? The number for Bank Borrowing is Rs5.14tr and for Non-Bank Borrowing is 2.66tr. Adding the two figures we get Rs7.8tr, which is 41.33pc of the total outlay. In other words, less than 60pc of the badly needed funds will be raised through taxes, remittances and privatisation, with the shortfall of over 41pc coming from bank or other borrowing. If the trend is not reversed soon and our debt servicing grows further, we will soon be raising up to 50pc of the budget outlay through borrowing, which is not at all advisable.

Let’s turn now to the Expenditure side of the budget. Even a cursory glance at the numbers reveals that the only expenditure account that’s important here is Interest Payments (Total Markup on Foreign and Domestic Debt). Now, here’s the rub. Interest payments of Rs9.77tr (as shown above) mean that over half of the funds raised (51.77pc of it to be exact) will be spent on debt servicing. The figures also make it clear that interest payments have even dwarfed defence spending, which today stands at a rather innocent-looking figure of Rs2.12tr.

Meanwhile, an analysis carried out by us has revealed that over the years the amount for debt servicing has been growing rapidly, increasing by over 300pc in the last four years or so. Efforts should, therefore, be made across the country and overseas also to arrest the growth of debt servicing.

TAGS: Pakistan, federal budget 2024-25, budget outlay, expenditure, debt servicing, interest payments, spending, Pakistanis