The burden of debt servicing on the national exchequer is likely to swell to Rs. 4 trillion due to heavy government borrowing and high-interest rates during the next fiscal year, sources revealed on Wednesday.
The Finance Ministry is giving the final touches to the crucial budget targets to present before the parliament on 10 June. Sources said that the Finance Ministry is estimating the cost of debt servicing on total government debt stock at Rs. 4 trillion during the next fiscal year, including Rs. 3.5 trillion for domestic debt and Rs. 0.5 trillion for external debt.
The main reason behind this increase in the cost of debt servicing is heavy borrowing by the government to run its affairs from domestic resources and high-interest rates during the last couple of months. It is pertinent to mention here that the govt had set the original target of debt servicing at Rs. 3.1 trillion for the current fiscal year.
The government is also proposing Rs. 800 billion for the federal development plan for the next fiscal year. The total size of the development budget will mostly depend on the decision of the National Economic Council, which has to meet very soon.
The government is also trying to decrease subsidies for the next fiscal year over conditions set by the International Monetary Fund (IMF). The size of government subsidies will also depend on the outcomes of the meeting with the global agency, sources said.
Sources also mentioned that the Finance Ministry is projecting a budget deficit of 4.8 percent of GDP (Rs. 3.8 trillion) for the next fiscal year to revive the stalled IMF loan program. Despite the unusual increase in debt servicing compared to the outgoing fiscal year, the government is still trying to minimally increase total budget expenditures for the next fiscal year due to the pressure from the lender.
The sources also said that the Finance Ministry is considering jacking up the defense budget by 5 percent to Rs. 1.5 trillion for the next fiscal year as compared to the current fiscal year.
The government is also working to set the target of the Federal Bureau of Revenue’s (FBR) tax collections at Rs. 7.2 trillion for the next fiscal year. However, the non-tax revenue is expected to be Rs. 1.5 trillion for the current fiscal year.