Amid the surge in coronavirus cases in Pakistan, the nation's financial woes are also escalating.
According to the Asia Times, the national fiscal deficit has surged to over 7 per cent of gross domestic product (GDP) and could exceed 9-10 per cent as the state revenues are plummeting due to COVID-19 pandemic.
Under Prime Minister Imran Khan, the government has added nearly USD 22 billion, that is 35 per cent to the nation's international debt pile in the last two years. It includes USD 5.5 billion worth of borrowings from Saudi Arabia, the United Arab Emirates and Qatar, USD 6.7 billion from China and USD 4.8 billion from the International Monetary Fund (IMF) and Asian Development Bank (ADB).
Meanwhile, the government has recently received USD 1.39 billion from the IMF under a rapid financing instrument facility to cushion the economic shocks caused due to COVID-19 outbreak. However, this help will not be sufficient to save the country's inflation, which was up 11.8 per cent from July to March 2020, according to the World Bank.
During Khan's two-year-rule, the Asia Times reported that Pakistan's domestic debt has soared, increasing by 35 per cent to 22.5 trillion rupees (USD 135.5 billion) as of March-end.
As the latest budget has cut subsidies, increased petroleum levies, capped salaries and pensions, and slashed provinces' share of state revenues to control the increasing deficit, Agha Shahab Ahmad Khan, president of Karachi Chamber of Commerce and Industry (KCCI), was quoted as saying, "The budget accentuates the fast-shrinking fiscal space which is symptomatic of a bigger economic abyss."
He said, "If they did not make some structural adjustments, the country is likely to fall into a monetary crisis in the next financial year."
"The COVID-19 related implications for trade and industry are still not fully evaluated. Even in the pre-pandemic scenario, before December 2019, our economy was not doing well due to global recession, monetary distress and high-interest rates," the KCCI president said while adding that the nation was already facing "liquidity crisis".
The government needs to launch a "revival and survival" package to save the economy while also ensuring "a more fair distribution of resources," he added.
Meanwhile, the State Bank of Pakistan (SBP) has reportedly stated that to cover the new budget deficit, the government will borrow 3 trillion rupees (USD 18.1 billion) from commercial banks in the form of three-month to 20-year treasury and sovereign bonds.
It also said that around 66 per cent, or 1.98 trillion rupees (USD 11.9 billion), will be needed to retire the maturing domestic debts. While the budget includes 6.57 trillion rupees (USD 39.6 billion) revenue target for the new financial year, 2.87 trillion rupees (USD 17.6 billion) will be distributed to the provinces and the rest will be distributed for national defence, debt servicing, general administration and development.
However, the Asia Times quoted a senior executive at a consulting firm as saying, "Even if the country managed to achieve the revenue target, the debt servicing liabilities will gobble up over 78 per cent of the federal government's revenue."
The country's debt burden has been unnecessarily inflated by the high defence budgets, which rose by 11.8 per cent year on year to 1.29 trillion (USD 7.8 billion) in the present budget, he said.