Pakistan net revenue receipts drop to all-time low

Finance ministry high-ups say nothing to worry
as govt following effective debt strategy

ISLAMABAD: In an alarming development that happened for the first time in the country’s history, Pakistan’s net revenue receipts failed to meet the requirements of even debt servicing during the first quarter of the current financial year 2016-17, indicating that the country is plunging towards a debt trap.

The net revenue receipts versus debt servicing have turned into negative, which simply means that the federal government is unable to meet the expenditure on account of debt servicing heads.

The federal government is now forced to go on rampant borrowing for meeting major expenditure heads including three Ds (debt servicing, defence and development). 

The net revenue receipts are calculated out of the total gross collection and after transferring of financial resources to the provinces, the remaining amount is net revenues receipts of the federal government. It had never happened in last two to three decades that the net revenue receipts of the federal government could manage to meet requirements of two major expenditures items but now the fiscal woes were worsening where the net revenue receipts of the federal government could not fully meet the requirements of single head such as debt servicing. 

The net revenue receipts of federal government stood at Rs369.4 bn but the debt servicing on domestic and foreign debt consumed Rs 413 billion during the first quarter (July-Sept) period of the current financial year so it remained negative at Rs 44 billion. The servicing of domestic debt had consumed Rs 392 billion and foreign debt Rs 21 billion in the first quarter of the ongoing fiscal year.

The gross revenue receipts had fetched Rs785.962 billion during July-Sept period of fiscal year 2016-17 out of which the federal government had transferred Rs416.472 billion to provinces so the net revenue receipts stood at Rs369.4 billion.

Earlier, the net revenue receipts of the federal government had always remained sufficient for meeting requirements of debt servicing and largely defense requirements and the federal government was used to get loans to run the affairs of the development and running of the civil government as well as for provision of subsidies.

For instance, the net revenue receipts stood at Rs576 billion during the first quarter of the last financial year 2015-16 while the debt servicing on both domestic and foreign loans had consumed Rs415 billion. So the net revenue receipts had met defense requirements of Rs 145.6 billion in the first quarter of the last financial year 2015-16.

The net revenue receipts were standing at Rs474.88 billion in the first quarter of financial year 2014-15 but the debt servicing had consumed Rs 393 billion and superannuation allowances & pension had consumed Rs 39 billion so these two heads were fulfilled with the help of net revenue receipts of the federal govt.

The net revenue receipts of the federal government were standing at Rs457.5 billion in the first quarter of financial year 2013-14 while the debt servicing on domestic and foreign loans had incurred expenditures of Rs300 billion and the government had also managed defense requirements of Rs146 billion in the first quarter of the same financial year.

Talking with The News, Dr Vaqar Ahmed, Deputy Executive Director SDPI said that it would be hard for the government to raise revenues in the upcoming tenure of electioneering as well as the debt strategy has not worked well because the trimming of expenditures could not be done especially on account of circular debt. The fiscal woes are worsening day by day, he added.

When contacted to renowned economist and former economic advisor Sakib Sherani on Friday, he said that this trend was worsening from quite some time but it had never so bad as it had now turned into negative indicating that it was sign of debt trap.

However, Finance Ministry high-ups, when contacted, argued that the government had placed an effective debt strategy including amending the Fiscal Responsibility and Debt Limitation Act (FRDLA) with the approval of the Parliament this year through which the debt to GDP ratio would be brought down to 50 percent in next 15 years. There is nothing to worry about on this account, they concluded.