Debt burden and rising budget deficit

  account income and expenditure. If the expenditure exceeds the income, it is called budget deficit. The home, institution or country borrows to cover the deficit. If this loan is used to cover the deficit, then the deficit continues to grow.

As of December last year, the federal government's revenue was Rs 14 trillion, while the government spent Rs 24 trillion during the same period. Thus, the budget deficit of the federal government alone has reached Rs 10 trillion. Now the question arises where did the government spend Rs 24 trillion? Expenditure of any government is in two periods. One is related to the development sector while the other is related to services.

 

Industries are set up in the development sector, new projects are started. Similarly, salaries and pensions are paid in the services sector. Looking back over the last six months, no new projects have been launched in the country and the government has not paid any attention to industries and construction work. In other words, his work in the construction sector was zero. So were 24 trillion spent only on pensions and salaries? We also have an overview of it. According to government sources, most of the federal government's expenditure is on loans to former governments. That is, new loans are being taken out to pay off the first one. The question now is, is the debt burden dangerous for governments? Borrowing is not a bad thing at all, but it is important to use the resources to borrow and repay.

Whether it's industrialized countries like Japan and the United States, or mineral-rich countries like Saudi Arabia and Venezuela, they all resort to debt to run their economies. Japan is currently the world's largest borrower. Japan's debt is 237.54% of GDP. Similarly, Venezuela's debt is 214.15% of GDP, Sudan's is 177.87% and Greece's debt is 174.15% of GDP. Now the question arises why these countries are borrowing more than the growth rate? Why are these countries developing despite borrowing? Most countries around the world borrow and invest in bonds or development projects. That is why these countries are developing despite borrowing at a higher rate than GDP.

At present, the debt owed by Pakistan to international organizations has exceeded Rs. 36,000. In the first two years of the current government alone, more than Rs 11,000 was borrowed. The government claims that it is taking this loan to pay off the debts of the previous governments. We also have a review of past governments in front of you.

First of all, if we look at the PPP regime in 2008, the PPP inherited economic, political and security issues. At that time, there was no way to increase government resources even in terms of taxes. Investors were leaving the country because of electricity and security. Due to the war on terror and Dow Moore's demands, the PPP government had to spend billions of rupees on national defense. Due to which the government had to resort to debt to run the country's system. Thus, during the PPP regime, the country's debt increased by 135%. Between 2008 and 2013, the debt burden on the country increased from Rs 6,435 billion to Rs 15,096 billion. Similarly, the country's debt-to-GDP ratio increased by 4.4 percent. That is, domestic debt to GDP 67. 2%. The PPP government resorted to local loans instead of external loans. Perhaps that is why the PPP government did not face strict conditions. Similarly, the budget deficit increased by 135% between 2008 and 2013.

The PML-N came to power after the PPP. Even during his tenure, the growing budget deficit was a major challenge. As expected, the then government went to the IMF. But as in previous periods, the PML-N has failed to overcome the budget deficit. The PML-N government was also facing power crisis. There were no sources of income. World oil prices were hovering around ڈالر 100 a barrel. Inflation was up to 10 percent. But at the same time, in 2015, the world market oil prices changed dramatically and the price of oil reached 50 50 per barrel. Not only that, but interest rates in the global market fell sharply and helped Pakistan borrow at a lower rate. The PML-N took advantage of both these opportunities. Thus, from 2013 to 2018, the national debt increased by 79%. And the national debt reached 26,938 billion. Meanwhile, the debt-to-GDP ratio is also rising

The question arises as to how the PML-N made effective use of debt during its tenure. PML-N has set up power projects across the country. Operation Redalfsad eradicated extremism and terrorism from the country. Investors' confidence in Pakistan was restored. The wheel of industry began to turn. Investment began to be made in the country, thus creating job opportunities. The economy recovered, inflation eased and the people had confidence in the government.

Pakistan Tehreek-e-Insaf comes to power in 2018. They get a peaceful Pakistan. Surplus power, C-pack, excellent infrastructure. The new government should have taken advantage of this, but administrative incompetence and wrong decisions once again pushed Pakistan back. In just two and a half years, he set a record by taking a loan of Rs 17,562 billion. If these policies continue till 2023, this government will gradually leave a debt burden of Rs 60,000 billion for the people.

The situation at the moment is that the country's GDP has gone into minus. Wages are being paid with loans. Development projects are not being implemented. The Prime Minister is given wrong figures. The government is not taking advantage of the opportunities due to lack of timely decisions. Oil and gas prices fell during the Corona lockdown, we did not make timely decisions, the consequences of which are being felt today. There was an open field for access to the world market, but the focus on exports was delayed. On the one hand, foreign exchange marriages are taking place, on the other hand, the same money is being spent on debt repayments and import of goods.

Now the question arises how the budget deficit can be met? The government must now focus on improving the tax collection system. Similarly, development projects will have to be implemented, which will create employment opportunities. Government revenue will increase. The most important thing is to save by reducing non-development expenditure. At the moment, the government will have to make decisions on an emergency basis, as international institutions are currently refusing to lend, while local banks are also unwilling to lend, nor can the country afford to bear the burden of debt.

The government will have to implement an asset-building policy instead of a policy of mortgaging assets and borrowing. Only then will the budget deficit be reduced and the country's economy move in the right direction