ISLAMABAD: The World Bank (WB) has said that the increasing fiscal deficit and heavy burden of debt are dangerous for the economy of Pakistan.
It said that federal expenses are one of the biggest causes of budget deficits, believing that the nation can save 2,723 billion rupees annually by eliminating unnecessary expenditures and subsidies.
The World Bank, in its latest report, said that the continuous low fiscal revenue is one of the main drivers of the country’s recurrent budget shortfall, as Pakistan’s total revenue collection has been decreasing over time, with the financial year 2018–22 average at 12.5% of GDP, low from the financial year 2013–17 average of 13.2%.
World Bank on revenue collection
The Bank said that the nation’s total revenue collection averaged 12.8% of GDP over the past decade, significantly lower than the South Asian average of 19.6%. Tax revenue collection, which averaged 10.3% of GDP over the past decade, is also meager.
The report added that Pakistan requires to control its growing economic losses and debts. The burden of interest payments on loans, government employees’ salaries, and pensions is piling up.
According to the Bank, the federal government gets 46per cent of the income under the NFC award, while its budget expenditures are 67 percent; the decline in GDP growth is likely to decrease per capita income as well.
World Bank’s suggestions
The report suggested that by curtailing unnecessary expenditures and subsidies, 2 trillion rupees can be saved. By limiting unnecessary subsidies and expenses and increasing taxes, Pakistan can collect an additional 2,723 billion rupees.
As per the WB, during the financial year 2022, Pakistan has reached its highest level of economic losses in the past 22 years. The debt-to-GDP ratio has reached 78 percent during the financial year 2022.
The Bank noted that the country’s increasing budget deficit is majorly due to a lack of tax collection.
It said that the tax system of Pakistan is complex, and it has a narrow tax base and high rates. The tax system has a number of special provisions, exemptions, concessional rates, and, to some extent, unorthodox approaches to taxation policy.
