ISLAMABAD - The government will borrow massively from external as well as domestic sources ahead of general elections to finance the revised twin deficits during current fiscal year.

The government has revised upwards the targets of twin deficits, budget and current account deficits, to 5.2 percent and 5 percent of the GDP respectively for the current fiscal year, according to the official of the ministry of finance.

The government has once again revised the budget deficit target to 5.2 percent of the GDP (Rs1882.2 billion) for the ongoing financial year. Earlier, the government had revised the target to 5 percent of the GDP from 4.1 percent (Rs1.48 trillion), which was approved by the parliament in June last year. The government has revised the budget deficit target due to expected increase in expenditures ahead of general elections. The International Monetary Fund (IMF) in its recent report said that the deficit may even go higher due to upcoming general elections. The IMF has projected Pakistan’s fiscal deficit at 5.5 percent of GDP this year.

Similarly, the current account deficit could reach 5 percent of GDP (equal to $17.3 billion) for the current fiscal year. The current account deficit was recorded at $9.2 billion during seven months (July to January) period of the year 2017-18. Pakistan's current account deficit would widen largely because imports increased more than exports. Imports could be touching $54 billion mark in fiscal year 2018 against the country's exports, which will be around $24 billion during current fiscal year.

The government would need around $8 billion to finance the current account deficit in four months. Advisor to Prime Minister on Economic Affairs Dr Miftah Ismail on Friday said that some borrowing would have to be made. “State Bank of Pakistan will have $12.5b by end-June”, he said and hinted that government would borrow from external sources.

The government had already borrowed $6.9 billion from external sources in just seven months (July to January) of the current fiscal year. For FY2017-18, the government had estimated to receive $8.094 billion in foreign loans. Keeping in view the current trend, the government is all set to break the previous year’s record of borrowing around $10 billion in a single year. Last year, the government had borrowed $10.2 billion from external sources as against the target of $8 billion.

The IMF has expressed concerns on the weakening of the macroeconomic situation, including a widening of external and fiscal imbalances, a decline in foreign exchange reserves, and increased risks to Pakistan’s economic and financial outlook and its medium term debt sustainability. The country’s public debt stood at Rs 20,878.3 billion (61.6 percent of GDP) on December 2017 while the net domestic debt was Rs 13,495.8 billion (41.1 percent of GDP) and external debt remained at Rs 7,382.4 billion (20.6 percent of GDP).