Pakistan has developed a comprehensive long-term “debt-to-GDP” framework to reduce the country’s outstanding debt burden on a sustainable basis and establish economic discipline. According to the official plan presented, the government has set a target of gradually reducing the debt-to-GDP ratio over the next ten years.
Under this strategic roadmap, the debt-to-GDP ratio will be brought down to 67.4 percent of GDP by the next fiscal year, with the ultimate goal of further reducing it to a sustainable level of 55.7 percent by 2034.
Along with this fiscal discipline, the International Monetary Fund (IMF) has made a significant proposal to increase the budget and assistance amount of the Benazir Income Support Program (BISP) to protect the country’s disadvantaged sections from economic stress. According to the detailed figures of the framework, the debt-to-GDP ratio will be brought down to 64.7 percent in 2028 and 61.6 percent in 2029.
Under the long-term effects of economic stabilization, this ratio will shrink to 56.8 percent in 2033 and finally to 55.7 percent in 2034. However, the International Monetary Fund has made it clear that all these targets can be achieved only if fundamental changes are made in the country’s financial structure.
On the other hand, the IMF, in its strongest advisory, has said that the implementation of this framework will be impossible without strict control over expenditure and comprehensive reforms in the Federal Board of Revenue (FBR). The Fund is of the view that if state expenditure is not regulated, the debt burden on the country’s economy will never be reduced.
The global organization has urged the government to immediately widen the tax net, strictly control the energy sector’s trillion-rupee circular debt, and reduce losses of loss-making state-owned enterprises (SOEs).
According to the IMF, decisive and urgent reforms in all these areas are essential to make external financing sources sustainable and stable.