Pakistan’s Fiscal Overview?

[00:00:00] Junaid Iqbal: Pakistan has tremendous economic potential.
[00:00:01] Junaid Iqbal: We are the fifth largest population in the world.
[00:00:04] Junaid Iqbal: We have nuclear power, yet why do we keep asking for loans from the IMF and friends all the time?
[00:00:06] Junaid Iqbal: The answer is actually quite simple.
[00:00:09] Junaid Iqbal: If we just look at our federal budget, which tells us where the country’s money comes from and where it goes, then the whole situation becomes clear.
[00:00:13] Junaid Iqbal: In the fiscal year 2023, our budget was 000 billion, which in dollars is 65 billion dollars, so that it’s easier to understand and remember.
[00:00:18] Junaid Iqbal: Imagine our budget was ₹1, like every budget, this ₹1000000.
[00:00:25] Junaid Iqbal: Government resources which are various kinds of government revenue sources, together make a total of 60, which means our total income was 60.
[00:00:30] Junaid Iqbal: Now on the expenses side, first, ₹ goes on debt servicing which includes the interest and principal payments of the debt we have taken till date.
[00:00:53] Junaid Iqbal: After that, 10 on defense, 4 on running the civil government, then 4 on civilian and military pensions.
[00:01:04] Junaid Iqbal: 7 on subsidies, 6 on grants, then the share of the provinces takes ₹ which is given under the NFC Award, and then the remaining ₹ goes to the Public Sector Development Program, so here your total is ₹1.
[00:01:17] Junaid Iqbal: Now you might be asking, the expenses are counted and income is only 60, so where does this difference go?
[00:01:20] Junaid Iqbal: The difference of 40 is called the budget deficit or in Urdu it is called khassara, and we fill this deficit every year by taking loans.
[00:01:25] Junaid Iqbal: So it means that by the time we spend on interest payments, defense expenditure, civil government expenditure, pensions, and subsidies, our income has already been spent.
[00:01:33] Junaid Iqbal: And on top of that, every rupee that is spent on education, health, provinces, development is spent through borrowing, and because every year our budget is in deficit, we keep taking more loans.
[00:01:40] Junaid Iqbal: In 2019, out of ₹1 our deficit was ₹1, in 2022 also out of 100 our deficit was ₹, so this trend has been ongoing for quite some time.
[00:01:45] Junaid Iqbal: And because of this, our total debt keeps increasing and obviously, if the outstanding debt increases, then the debt servicing which includes its interest etc. also increases.
[00:01:51] Junaid Iqbal: Borrowing itself isn’t necessarily a bad thing, the question is what are you borrowing for.