The budget deficit in the last fiscal year, the PML-N’s last year in office, was Rs2.26 trillion, which is the highest it has been in the last five years.
The statement of revenue and expenditures for the party’s last year revealed that the deficit was 6.6% of the GDP.
Former finance minister Ishaq Dar of the PML-N government, which completed its term on May 31, had set a target of 4.1% of the GDP for fiscal year, which ended on June 30, 2018, but ended up 2.5 percentage points higher. This is the highest budget deficit since 2013 when it reached 8.2% of the GDP.
In its five-year term, the former government increased tax revenue from 9.6% to 13% of the GDP but expenditures during this period also rose from 21% to 21.8% of the GDP.
Being in a deficit means, the government spends more and earns less. Unable to increase its revenue, Pakistan has heavily relied on borrowing, mostly short-term, from both local and foreign institutions to meet its financing needs.
With the country’s national debt touching Rs27 trillion, it is trapped in a cycle where it takes more loans to service the previous debt and is left with little money to spend on development. For example, in the latest fiscal year, markup payments were 20% of the total expenditure and almost equaled development expenditures that constituted 21% of government expenses for the period.