Fiscal Deficits and Debt Dimensions of Pakistan (Macro Management) (Report‪)‬

This paper has mathematically analysed the domestic fiscal deficit and debt. It has been found that unless necessary measures are taken the primary budget deficit in absolute terms is likely to increase annually at about 18 percent. To meet the resource gap requirements given rise by such an increase in the fiscal deficit, the needed net external borrowing is likely to increase by 16 percent and net internal borrowing by 18 percent per annum. Consequently, the debt-servicing now growing at a compound rate is expected to rise by 9 percent of GDP by 2015. Using a simple model, we have estimated the average levels of financeable deficit with reference to three different scenarios of growth rates of GDP and inflation. The fiscal deficit is reduceable to around 3 percent of GDP with GDP growth rate of 6 percent and inflation rate of just about 10 percent. Domestic revenue generation must improve domestic production and from reforms of the current tax system along with increased output and export of quality products to support the required GDP growth. INTRODUCTION