SBP reveals govt. spending on debt servicingAccording to the December’s Statistical Bulletin issued by State Bank of Pakistan (SBP), the country spent 66pc of the collected tax revenue on debt servicing. From the tax collected in the first quarter of the fiscal year 2016-17, Rs414 billion were spent in debt servicing during July-September.

The report by SBP revealed that out of Rs625bn of tax money collected in the first quarter, the government has only 34pc or less money to run the country. Debt servicing has been eating away the national revenue collected from taxes. Pakistan, in comparison with its vast population, has a very small tax base. The government is hitherto facing criticism for increasing taxes on the already taxed sectors of the Pakistani economy.

The foreign aid and loans taken by the current government poses a serious problem for the economy as the higher debt servicing means a shortage of revenues, the problem mostly dealt with cutting developmental expenditures. According to SBP, the current government has crossed Rs1 trillion in national debt in the first five months of the current fiscal year 2016-17.

The rising trend of low revenue collection and higher debt servicing is leading to the higher fiscal gap, which is an alarming condition for the economy. The government has accumulated record foreign exchange reserves of over $23bn and also Rs8tr. through domestic borrowing through banks and non-banks.

Due to such excessive borrowing, the domestic and foreign debt servicing will likely increase this fiscal year leaving less money in the government’s pockets to run the country. Such a situation can damage the developmental projects that are already in the works and can ultimately cause harm to the economy of Pakistan.