Uzair bin Farid

The federal government is likely to face a gap of Rs7.5 trillion in revenue and expenditure during the fiscal year 2023-24. According to budget documents, the total revenue of the federal government for FY24 is estimated at Rs6.9 trillion whereas total proposed expenditure will be Rs14.4 trillion. The increase in government expenditure is mainly due to the rise in estimated current expenditure. During FY23, the government's current expenditure was Rs8.7 trillion, while this year, the government had to increase it by 53.2% to Rs13.3 trillion. Similarly, the Public Sector Development Program (PSDP) also saw an increase in the budgetary allocation of FY24. During FY23, the proposed budgetary allocation for the PSDP was Rs727 billion, whereas for FY24, it is Rs950 billion, which represents an increase of 30%. Also, the net lending will see an increase of 31.9% over the previous fiscal year. During FY23, it was proposed to be Rs144 billion, whereas this year, it is proposed to be Rs190 billion.

The gap in expenditure and financing will be covered mainly through net external financing, net domestic financing, and privatisation proceeds. Of these, the government will raise the highest amount of money from selling government securities to the tune of Rs4.7 trillion. It will be followed by net external financing, of which multilateral and bilateral sources will provide Rs1.5 trillion and commercial and Euro bonds will help the government accrue resources worth Rs1.1 trillion. Privatisation proceeds will help in raising a meagre Rs15 billion, whereas national saving schemes, government provident (GP) fund and deposits and reserves will help the government raise Rs7 billion. An increase in the fiscal deficit on the back of increased current expenditure will be financed mainly through an increase in revenue from multilateral and bilateral sources and sale of government securities.

During FY23, the revenue that was raised from multilateral and bilateral sources was Rs548 billion, whereas this year, it would be Rs1.586 trillion, representing an 189% increase. As for government securities, during FY23, they were proposed to be Rs2.9 trillion, whereas this year, they are proposed to raise Rs4.759 trillion, representing an increase of 60%. In order to reduce fiscal deficit, the government needs to undertake extensive reforms of the bureaucratic structures of the country, which usually eat away at the majority of its resources. The bloated bureaucratic system that the state has in its employment must be reduced in size so that limited resources could be diverted into increased allocations for education, health, public infrastructure, old-age benefits, higher education, research and development, and global integration through cultural development and promotion.

Credit: INP-WealthPk