Year-end alarm bells | Farrukh Saleem

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Alarm bell number 1: From July to September, the federal government’s net revenue receipts stood at Rs369 billion. For the same period, the federal government’s debt servicing liability stood at Rs413 billion. Lo and behold, the federal government’s net revenue receipts are not even enough to cover debt servicing. For the record, net revenue receipts have never been so low ever.

The federal government must borrow to cover defence. The federal government must borrow to cover pensions – both civil and military. The federal government must borrow to cover the expenses of running the civil government. The federal government must borrow to cover public order and safety affairs. The federal government must borrow to cover environment protection. The federal government must borrow to cover health affairs. The federal government must borrow to cover the expenses on ‘culture and religion’. The federal government must borrow to cover all allocations for social protection.

Alarm bell number 2: For the first five months of the current fiscal year, the repatriation of foreign exchange in the form of profits and dividends on foreign direct investment stood at $591 million. For the first five months of the current fiscal year, the total foreign direct investment stood at $460 million. Lo and behold, Pakistan paid out $131 million more than what Pakistan received as foreign direct investment.

What this means is that foreigners are taking out more dollars from Pakistan than the dollars being invested into Pakistan by foreigners. This is both scary and unsustainable.

Alarm bell number 3: From July to November, our exports stood at $8.7 billion. For the period between July and November, our imports stood at $17.3 billion. Lo and behold, Pakistan’s goods deficit stood at a colossal $8.6 billion. For the period between July and November, the current account deficit reached $2.6 billion, widening by an alarming 91 percent year-on-year. On a pro-rata basis, an annual current account deficit in excess of $6 billion is both scary and unsustainable.

Alarm bell number 4: Between June 2013 and June 2016, the government took dollar loans. From the World Bank, ADB and Islamic Development bank, it took $9.7 billion. From the IMF, it borrowed $6.2 billion. Bilateral loans amounted to $3.6 billion while bonds issued stood at $3.5 billion. From commercial banks, it took $1.85 billion. That’s a total of $25 billion over three years (over the same period, $11.95 billion was spent in the repayment of previous loans). To be certain, all these new foreign loans would have to be paid back in dollars. Lo and behold, our exports are going down and foreign investors are taking out more dollars than they are bringing into Pakistan. Again, this is scary and unsustainable.

Alarm bell number 5: On October 13, the IMF completed its twelfth and the final review under the $6.2 billion Extended Arrangement. To be sure, the budget for 2016-17, under the direction of the IMF, kept a cap of 3.8 percent of GDP on the budgetary deficit. The IMF plan has come to an end and the election is coming up. Now, prepare for a ballooning budgetary deficit.

The writer is a columnist based in Islamabad.