The coalition government has informed the International Monetary Fund (IMF) about significant changes in the new budget, indicating a major financial challenge for the fiscal year 2024-25.
According to officials from the Ministry of Finance, the net government income is projected to decline by Rs1,258 billion, decreasing from Rs10,377 billion to Rs9,119 billion. This decline is expected to increase the financial deficit to Rs9,758 billion, surpassing the initial target of Rs8,500 billion. The budget deficit is expected to increase by Rs1,258 billion this fiscal year.
Sources within the ministry attribute the need to revise these targets to a significant drop in non-tax revenue. The budget originally set a non-tax revenue target of Rs4,845 billion, which has now been revised downward to Rs3,587 billion. Specifically, the State Bank's profit is now anticipated to be Rs1,258 billion, down from the previous estimate of Rs2,500 billion.
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To address the budget deficit, the government plans to secure additional local and foreign loans. The estimated increase in government loans for this financial year is Rs8,489 billion. Despite this, the debt-to-GDP ratio is expected to remain at 64%, with total government debt projected to reach Rs79,731 billion.
The Ministry of Finance also projects that Rs9,775 billion will be spent solely on interest payments for the loans in the current financial year. However, considering a provincial surplus of Rs1,217 billion, the federal budget deficit could be limited to Rs8,541 billion.
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Additionally, the government expects to receive Rs1,281 billion from the Petroleum Development Levy, which will contribute to managing the deficit.
In summary, while the government aims to keep the debt-to-GDP ratio stable, the significant drop in revenue and increased reliance on loans highlight the fiscal challenges ahead for Pakistan. The revised budget figures and strategies to manage the deficit will be crucial in the government's financial planning and negotiations with the IMF.
