Pakistan Public Expenditure Review 2023
Executive Summary
Pakistan’s fiscal deficit has consistently been large and growing, posing significant risks to both fiscal and debt sustainability. In fiscal year 2022 (FY22), the general government deficit reached 7.9% of GDP, matching the level seen in FY19. This deficit is the largest in over 22 years (Figure ES.1).
Over the past decade, the deficit has averaged 6.2% of GDP, with the post-2010 annual average being 50% higher than the pre-2010 period.
Key Findings and Recommendations
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Recurrent Fiscal Deficits and Their Impact
- Persistent and growing fiscal deficits pose risks to fiscal and debt sustainability.
- The deficit in FY22 was 7.9% of GDP, the highest in over 22 years.
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Rationalizing Federal Fiscal Expenditures
- Federal fiscal expenditures need to be rationalized to save fiscal resources and improve the efficiency of development spending.
- Specific focus areas include reducing rigid spending and enhancing the distribution of subsidies to benefit the poorest quintiles.
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Non-Budgetary Drivers of Debt
- Non-budgetary factors contribute significantly to the debt stock.
- Recommendations include managing these drivers effectively to reduce the debt burden.
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Impact of Federal State-Owned Enterprises (SOEs)
- Federal SOEs have a significant impact on the finances of the Federal Government.
- Efforts should be made to minimize their financial impact.
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Enhancing Fiscal Revenue Collection
- There are several avenues through which fiscal revenue collection can be enhanced.
- Recommendations include improving tax collection and reducing tax expenditures.
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Policy Recommendations and Federal Fiscal Savings
- Detailed policy recommendations are provided to address fiscal challenges.
- Specific measures aim to enhance fiscal savings and improve overall financial stability.
Supporting Data
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Figure ES.1: Government Budget Balances (Figure ES.1)
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Figure ES.2: Public & Publicly Guaranteed Debt (Figure ES.2)
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Figure ES.3: Twin Deficits (Figure ES.3)
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Figure ES.4: Government Borrowing from Banks (Figure ES.4)
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Figure ES.5: Federal government spending by rigidity (Figure ES.5)
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Figure ES.6: Distribution of benefits of different subsidies by quintile (Figure ES.6)
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Figure ES.7: Key Drivers of Public and Publicly Guaranteed Debt (Figure ES.7)
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Figure ES.8: Federal SOEs – Net Profit (Figure ES.8)
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Figure ES.9: Direct Fiscal Support to SOEs (Figure ES.9)
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Figure ES.10: Total revenue by source and year (Figure ES.10)
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Figure ES.11: Cost of tax expenditures by tax (Figure ES.11)
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Table ES.1: Key Fiscal Consolidation Measures (Table ES.1)
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Table ES.2: PER Policy Recommendations (Table ES.2)
These figures and tables provide detailed insights into the fiscal situation and recommend specific actions to improve Pakistan's financial health.
