Last year, our budget deficit was estimated at over Rs13 trillion.
This year, it’s expected to be around Rs11 trillion, much higher than the government’s initial estimate of Rs6.5 trillion to Rs7 trillion.
The government is supposed to keep the deficit at 5% to 6% of GDP, but it’s been consistently higher, around 8% to 10% of GDP. This means we’re borrowing a lot, leading to a total debt of over Rs81 trillion, nearly 80% of GDP.
We’re in a debt trap, avoiding default by borrowing more. This pattern continues with the help of IMF bailout programs.
One major issue is excessive spending by the government. We spend much more compared to countries like Bangladesh, leading to a high deficit.
After transferring many functions and resources to provinces, the federal government should have reduced its size, but it hasn’t. There’s also a lack of accountability in how funds are used at all levels of government.
A big chunk of our budget goes to paying off debt, mainly because of high interest rates. This leaves less money for other important areas like education and healthcare.
The central bank needs to lower interest rates to reduce the government’s borrowing costs.
The energy sector is also draining resources due to mismanagement. Privatization and reforms are needed to fix this.
To increase revenue, we need to improve tax collection by making the system simpler and fairer. High tax rates discourage businesses and lead to tax evasion.
Our tax-to-GDP ratio is low because of these issues. To improve, we must promote business growth and reform our tax system.