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Debt servicing up by 74% in first five months of FY24

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10 months ago

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  • Revenue surplus generated by the provinces declines as well.
  • Increasing markup payments a challenge for govt.
  • SBP’s Monetary Policy Committee is scheduled to meet next week.

ISLAMABAD: Amid high policy rates, Pakistan’s debt servicing in the shape of mark-up on principal and outstanding loans increased by 74% in the first five months (July-November) of the ongoing fiscal year compared to the same period of last fiscal year, reported The News on Thursday.

Furthermore, another challenge that has emerged on the fiscal front is the decline in the revenue surplus generated by the provinces. The revenue stood at Rs107.9 billion in the first five months of the current fiscal year against Rs 202.5 billion generated in the same period of the last financial year.

The main challenge confronting the government is the increasing markup payments in response to high policy rates that have led to an increase in the current expenditures significantly. However, the government is putting all efforts into controlling the non-mark-up spending which is evidenced by the rise in primary surplus during Jul-Nov FY24.

The SBP’s Monetary Policy Committee is scheduled to meet next week and if it increases the interest rate then debt servicing will eat more revenues in the months ahead and create difficulties for the Ministry of Finance.

During Jul-Nov FY2024, total expenditures grew by 43% to Rs4,831.0bn against Rs3,367.4bn last year. The current spending grew by 46% mainly due to a significant rise in markup payments that increased by 74 % during the first five months of the current fiscal year, while non-markup spending witnessed just a growth of 20% on account of the government’s curtailed spending.

The overall fiscal deficit stood at 1.3% of the Gross Domestic Product (GDP) equivalent to Rs1,375.4 billion in the July-Nov period of CFY2024 against Rs1,168.6 billion (1.4% of GDP) for the same period of the last financial year. However, the overall primary balance remained surplus to the tune of Rs1,542.1 billion in the first five months of the current fiscal year against Rs511 billion in the same period of the last financial year. 

The government had agreed with the IMF to restrict the primary surplus at Rs397.2 billion or 0.4% of the GDP for the current fiscal year.

The fiscal deficit was slashed to 1.3% of the GDP (Rs1,375.4bn) in Jul-Nov FY2024 from 1.4% of the GDP (Rs1,168.6bn) last year. The overall fiscal deficit for FY2024 is budgeted at 6.5% of the GDP. The primary surplus improved owing to contained growth in non-markup spending. It posted a surplus of Rs1,542.1bn (1.5 % of GDP) during Jul-Nov FY2024 against the surplus of Rs511.0 billion (0.6 % of GDP) last year. During Jul-Nov FY2024, net revenue receipts have improved by 68 % to reach Rs3,347.7bn against Rs1,996.5bn last year. This performance is largely attributed to a sharp rise in non-tax collection by 114% (Rs1,757.2bn against Rs822.4bn last year) and tax collection by 30% (Rs3,484.7bn against Rs2,688.4bn last year).

The FBR tax collection increased by 30.3% to Rs4,469bn during Jul-Dec FY2024 against Rs3,429bn last year. During the period, the FBR collected more than the assigned target of Rs4,425bn, thus exceeding Rs44bn. The revenue performance indicates that tax policy and administrative measures are paying off in terms of continuous improvement in revenue collection.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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3 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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3 days ago

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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4 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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