ISLAMABAD - The federal government had massively borrowed Rs1.7 trillion from the domestic sources in last fiscal year (FY2018) mainly to finance the increasing budget deficit of the country.

Pakistan's domestic debt and liabilities had recorded at Rs17 trillion in 2018 as against Rs15.31 trillion in a preceding year, according to the data of State Bank of Pakistan (SBP).

The domestic debt and liabilities had increased massively during the five years tenure of the previous PML-N government, as it had gone to Rs17 trillion in FY2018 from Rs9.76 trillion of 2013 showing an increase of over 74 percent.

"The sharp increase in debt is to finance the large fiscal deficit of the government," said an official of the Ministry of Finance. He further said that data showed that the fiscal deficit is likely to remain higher than the target. The budget deficit is expected to remain at around 7 percent of the GDP (2.5 trillion) during previous fiscal year as against the target of 4.1 percent of the GDP. The government had borrowed from the domestic sources during the huge shortfall in tax collection of the Federal Board of Revenue (FBR).

The FBR has collected net Rs 3,751 billion during 2017-18 against the downward revised target of Rs 3,935 billion, reflecting a shortfall of Rs 184 billion.

The SBP data showed that federal government long-term domestic debt - which is divided into permanent debt, floating debt, unfunded debt and foreign currency loans - increased 10.55percent to Rs16.4 trillion during the period under review. Similarly, the government domestic liabilities had gone to Rs588.4 billion in FY2018 from Rs457.3 billion of a year ago.

The central government long-term permanent debt had reduced to Rs4.65 trillion in FY2018 from Rs5.53 trillion of FY2017. Meanwhile, the borrowing under floating debt had enhanced to Rs8.89 trillion in last fiscal year as compare to Rs6.55 trillion of a preceding year. The amount of foreign currency loans remained at the Rs5.4 billion.

Unpopular steps to address economic challenges: Experts

Pakistan Tehreek-e-Insaf (PTI), after forming federal government, would have to take some unpopular decisions to address the economic challenges including taking foreign borrowing and going into International Monetary Fund (IMF)'s programme.

The PTI has already ruled out immediate relief for the people after forming its government. The government in-waiting has limited options to stabilise the economic situation of the country. The PTI has already announced to take foreign borrowing, which may come from IMF, commercial borrowings, bilateral loans or tapping global market.

However, economic experts believed that PTI led government would approach IMF, which would enable the World Bank and Asian Development Bank and other development partners to assist the government in its economic plan.

In short-run, the PTI-led government would heavily rely on foreign borrowing to avert the balance of payment situation. Pakistan's foreign exchange reserves are depleting due to repayment of previous loans and financing of current account deficit.

The PTI had already criticised the previous governments for taking massive loans in last one decade especially. Pakistan's external debt and liabilities are around $93 billion, which is expected to increase in next couple of years.

The expected PTI government would introduce unpopular measures if it goes into the IMF programme. The IMF programme is always tough for the successive governments in terms of its conditions for giving loans. The Fund provides its assistance alongside a policy mix to restore the macroeconomic stability of the country. The economic experts believed that approaching IMF will be disastrous as it will bring recession and hardship for the poor.

The government would have to accept the conditions of the IMF under bailout package. The IMF always emphasise on reducing the subsidies, which are normally given to the power sector. The government would have to increase the power tariff to reduce the subsidies.

The reduction in subsidies also fuelled the inflation rate in the country.

Similarly, the government also accept the one of the conditions of IMF of withdrawing tax exemptions and concessions given to different sectors of the economy.

The international lender may also emphasize to arrest the losses by Pakistan International Airlines (PIA) and Pakistan Steel Mill (PSM), likely by privatizing the loss-making public sector entities. Privatization of public sector entities may create unrest in these organizations due to the worker unions' pressure.

However, in some popular measures, the PTI has vowed to reduce the indirect tax and increase the direct taxes to enhance the tax collection. "The best relief for the people could be real reforms that included reduction in indirect taxes which have touched 90 percent now and increase recoveries from direct taxes," the PTI leader Asad Umar said other day. 

He said Imran Khan would not distribute jobs in D-Chowk, but increase revenues, reduce expenditures and open up six areas for investments and job creation. The PTI has vowed to give 10 million jobs in the country.