Pakistan may be in the middle of its worst-ever health crisis with coronavirus, but its federal government spent less than 0.2% of its revenue on health during the nine months ending March 2020, according to statistics published by the finance ministry Wednesday, May 6.
The federal government’s revenue for the review period (including two months since the WHO declared Covid-19 a global emergency) was Rs4,273 billion, out of which, it spent Rs7.66 billion on health. (This doesn’t count provincial spending on healthcare). The largest chunk of the center’s revenue went to interest payments followed by Defence. The two collectively ate up nearly two-thirds of the government’s revenue in the period under discussion.
Interest payments cost us Rs1,879 billion, which is almost equal to the federal government’s loss or deficit during the period. The federal government spent more money than it earned, which led to a gap or deficit of Rs1,686 billion. A deficit is the amount by which government’s spending outstrips its earning or revenue.
The military expenditure during this period was Rs802 billion or about half of the size of the government’s deficit.
According to media reports, the government missed its revenue collection target by more than half a trillion rupees. Amid lower revenue collection, especially in March when the country was under a lock down, the fiscal or budget deficit in these nine months expanded to 3.8% of the country’s GDP. This was more than a percentage point lower (better) than the corresponding period of the previous fiscal year. However, experts forecast it may expand to a tenth of the GDP this fiscal year, which ends on June 30, 2020, because of an economic slump caused by the coronavirus pandemic.
Successive governments have failed to increase tax collection or increase revenue, and as a result our fiscal deficit has ballooned over the years. The country has one of the world’s lowest tax-to-GDP ratios. Tax revenue as percentage of GDP is currently 8.2%.
On one side, the government fails to increase revenue, and on the other side, it keeps spending more than it earns, trapping itself in a debt cycle in which it takes fresh loans to pay off earlier debt. This leaves it with little space or savings to spend on its people.
In the nine months under review, the government spent Rs722 billion on the Public Sector Development Program, which translates into 11% of its total expenditure.