According to the Ministry of Finance, Pakistan’s net public debt has crossed the Rs18.28 trillion mark, rising about 35 percent during the tenure of the ruling Pakistan Muslim League-Nawaz (PML-N).
“The volume of net public debt as on Sept 30, 2016, was Rs18,277.6 billion,” the ministry’s response to PPP’s MNA in the National Assembly in the first week of February said.
Total public debt stood at Rs13.48 trillion at the end of the fiscal year 2012-13 – almost three years ago. The major contribution to the increase in net public debt came from an almost 40pc rise in domestic debt, which rose from Rs9.522tr at the end of 2013 to Rs14.385tr at the end of the first quarter of the current fiscal year (FY 2016-17). According to the ministry of finance official, in its three-year stint, the PML-N government has obtained $25 billion as fresh foreign loans in addition to borrowing Rs3.1 trillion ($30 billion) from the domestic market for budget financing. On the other hand, in December 2016, the government directed the Federal Board of Revenue (FBR) to prepare a comprehensive plan for increasing direct taxes in the next finance bill. According to The Economic Survey 2015-16, Pakistan’s tax structure depends heavily on indirect taxes. However, on account of various tax reforms, the proportion of direct taxes has risen steadily as direct taxes increased from 32pc in 2006 to 40pc in 2015.
An official of the ministry of finance told Daily Times on the condition of anonymity that direct taxes are likely to increase to 43.2 percent in the current fiscal year.
All these figures speak volumes that PML-N forgot its promise that after coming into power it will end government borrowings, decrease rates of taxes and minimise direct taxation to reduce burden on the general public.
They promised that the government would ensure sustained growth of the national economy through macroeconomic stability, doing away with the policy of borrowings from commercial banks and State Bank of Pakistan.
In May 2013 when PML-N came to power, Pakistan’s total public debt – which was less than Rs 3,000 billion on June 30, 1999 – reached to Rs 13,000 billion by the end of 2012.
To inquire about this promise, in 2017, Daily Times contacted Miftah Ismail, Special Assistant to the Prime Minister.
He said that PML-N had successfully reduced the budget deficit from 8.2% of GDP to 4.3% last year and the deficit is projected to be only 3.8% of GDP this year.
This means we have cut not only our deficit in half but also the need to borrow to finance the deficit in half also. Hence we have been true to our pledge to reduce borrowing and reduce debt as a percentage of GDP.
“We have also reduced the top income tax rate from 35% to 31% and will reduce this by another one percentage point next year. So we are trying to reduce tax rates. Finally, the share of direct taxes in total taxes that we collect has gone up marginally which means that we are relying less on indirect taxes,” said Ismail. But also consider the fact that we have increased tax revenues by around 60% in 3 years which is a record. And at the same time, we have increased the growth rate to 4.74%, and it is projected to be 5.5% next year, he added.
Pakistan People’s Party’s (PPP) Punjab’s Secretary General Nadeem Afzal Chan told Daily Times that the federal government borrowed an unprecedented Rs2.1 trillion in the last fiscal year that comes to about Rs5.7 billion per day on average. This is the highest-ever amount added to the debt pile of the country in a single year by any government. “The federation’s debt increased from Rs16.96 trillion to Rs19.1 trillion by the end of the 2015-16 fiscal year, the State Bank of Pakistan has reported,” said Chan. While commenting on the performance of PML-N government, Chan said that government has failed to provide relief to the masses and in fulfilling the pledges made with nation prior to general elections.
Independent Viewpoints: A leading tax lawyer and economic expert, Dr Ikramul Haq said that promises, as usual, were not kept and a contrary policy was adopted. The government, like its predecessors, has been recklessly borrowing to meet its burgeoning budgetary deficit that exceeded Rs. 2.5 trillion in 2015-16. According to latest data released by the State Bank of Pakistan (SBP), total debts/liabilities as on June 30, 2016, reached Rs. 22.459 billion as against Rs. 19.846 billion as on June 30, 2015, showing a monstrous increase of Rs. 2.61 trillion pushing debt-to-GDP ratio to 75.9%.
Dr Haq added that the government’s unabated borrowing to meet burgeoning budgetary deficit is one of the major weaknesses of economic governance coupled with unchecked wasteful spending on monstrous government machinery and inefficient PSEs.
He added that in taxes as well, the government has been passing laws to protect tax avoiders and were also beneficiaries of the same. Obviously, tax compliance does not suit the huge business empire of Nawaz/Shahbaz and family.
“It is not surprising that Nawaz Sharif during his third term as Prime Minister has already announced three tax amnesty schemes and now another is in the offing. In 2013, 2015 and 2016, he approved tax amnesties for tax evaders, which failed to mop up untaxed money,” said Dr Haq.
Another economic expert and adjunct faculty of Suleman Dawood School of Business at Lahore University of Management and Sciences, Huzaima Bukhari, agrees with Dr Haq.
“If economic growth merely refers to tearing apart the capital of Punjab and twin cities of Rawalpindi and Islamabad, constructing a couple of routes for commuters, laying heavy drainage systems, building massive flyovers, then the promise has been kept but at what cost?” Huzaima asked.
She added that the present government, like its predecessors, has been recklessly borrowing to meet its burgeoning budgetary deficit that exceeded Rs. 2.5 trillion in 2015-16. According to a report, the federal government intends to borrow Rs. 1.4 trillion from domestic banking sector during September-November 2016 alone. Today’s Pakistan represents a State where the ruling trio – civil-military complex, crooked politicians and profit-hungry businessmen – is very affluent, but the country is on the brink of bankruptcy.
Huzaima said that according to the Finance Minister when the present government took over in June 2014, public debt was Rs. 14318.4 billion, the external public debt of $48.13 billion and domestic public debt of Rs. 9521.9 billion. During July 2014 to December 2015, the total public debt increased to Rs. 18467.3 billion out of which external public debt was $53.36 billion and domestic public debt was Rs. 12878.1 billion-showing increase of Rs. 4148.9 billion, inclusive of $5.23 billion of external debt.
She added that managing high fiscal deficit (the root cause of many economic ills) coupled with massive debt burden is the toughest challenge faced by our economic managers. There is no scarcity of resources as propagated by the rulers to shift blame on others but issues are related to lack of management on the part of political leadership and bureaucracy.
It seems that PMLN has yet to fulfil its promises made to achieve financial discipline and pursue a balanced growth strategy.
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