Ministry of Finance has revealed that the debt servicing costs have been increased by 45 percent in the first quarter of current fiscal year to Rs. 1.4 trillion.
The Finance Ministry in its Monthly Economic Update and Outlook October 2023 stated the primary concern on the expenditure side is the rise in the cost of servicing public debt, with the rise in SBP policy rates to 22 percent and weaker PKR fueling the rise in servicing costs. Debt servicing costs increased 45 percent in Q1 to Rs. 1.4 trillion.
In addition, the higher markup payments will continue to pose significant challenges for fiscal consolidation efforts which are growing by 45 percent annually.
The government had estimated Rs. 7.3 trillion for debt servicing out of a total budget layout of Rs. 14.48 trillion. The cost of public debt is increasing at a skyrocketing speed due to the constant jacking up of policy rates by the Central Bank.
The report states that despite the increase in debt servicing cost, the government managed to limit growth in expenditures through a prudent reduction in untargeted subsidies and a reduction in spending on new projects and schemes under the PSDP.
The Monthly Economic Indicator (MEI) is developed as a tool to distribute the past annual GDP numbers, reported by the PBS, on a monthly/quarterly basis, and to nowcast GDP growth for the FY in which the National Accounts are not yet available on the same frequency.
It should be noted that some of the data underlying the September 2023 MEI are still provisional and may be revised next month.
The MEI estimated for the month of September 2023 stood positive on the back of improved high-frequency variables such as LSM, exports, and cement dispatches.
MEI is expected to be positive throughout the outgoing fiscal year due to a rebound in domestic economic activities.
The first quarter of FY2024 demonstrates that the economy is yielding positive results from the development and government
stabilization measures. In the real sector of the economy, Cotton and Rice production for 2023-24 has posted exceptional growth of
126.6 and 18.0 percent, respectively.
Similarly, LSM increased by 2.5 percent on a YoY basis in Aug-23, and on a MoM basis, it bounced back by 8.4 percent against the decline of 3.7 percent in July.
Moreover, the external account has improved considerably, and foreign exchange buffers are being built up. At the fiscal front, the government’s commitment to fiscal consolidation efforts and maintaining fiscal discipline is evident through better fiscal accounts during JulAug, FY2024.
In the coming months, it is expected that overall economic activity will remain positive throughout the outgoing fiscal year due to a rebound in domestic economic activities and an improvement in inflationary pressures.
Moreover, recent coordinated efforts by government organizations to address macroeconomic imbalances will gear towards achieving stabilization in the coming months and realizing sustainable and inclusive economic growth in the medium to long term.
Source: Pro Pakistani