Pakistan requires a gross financing of 29.2 percent of the GDP to meet the maturing debt obligations and to finance the budgeted fiscal deficit of 4.7 percent in the current fiscal year, according to International Monetary Fund (IMF). The IMF Fiscal Monitor for October 2014 maintains that Pakistan's gross financing needs would be 24.5 per cent of the GDP on account of maturing debt and 4.7 of the GDP to finance the fiscal deficit in 2014.
The IMF forecasts that clinically adjusted primary balance (CAPB), which is required to reduce the debt, is in deficit (negative) by 0.2 per cent. As a result, the country would rely on borrowing to meet the financing requirements. The IMF has projected greater financing requirements of 30.6 per cent in the next fiscal year with 26.6 per cent for debt obligation and 4.4 per cent to finance the budget deficit.
The country's net debt is projected by the Fund at 61.3 per cent of the GDP in the current fiscal year and gross debt at 63.7 per cent. The country's total debt limit was fixed at 60 per cent of the GDP in Fiscal Responsibility and Debt Limitation (FRDL) Act 2005. The fiscal monitor has projected the country's total revenue at 15.1 percent of the GDP and expenditure at 19.8 per cent of the GDP for the current fiscal year reflecting a gap of 4.7 per cent.
An official said that a deficit of 0.2 per cent in primary balance- revenue minus non-interest expenditure - clearly indicates that the government persists in heavy reliance on borrowing. He added that financial requirements would remain a major challenge for the country unless serious efforts are made to improve the primary balance by mobilising revenue and rationalising expenditure otherwise the situation of more borrowing to meet the financing needs due to problems associated with fiscal space would land the country in debt trap. The Fund has projected that Pakistan requires an adjustment (improvement) of 1.9 per cent in primary balance between 2014 and 2020.
Sources in the Finance Ministry on condition of anonymity said that the financing needs for the current fiscal year may be higher than the projection as a result of a shortfall in the revenue collection due to a number of factors and escalation in the fiscal deficit. The country's total debt has reached an alarming level due to short-term borrowings and more is expected in the current fiscal year to finance the likely larger than projected deficit, they added.