A significant portion of the new budget — Rs5.5 trillion, or 58 percent of the total – would be spent on debt payments and defense. In just a year, debt servicing costs have increased by almost Rs800 billion, or 26%. These two components accounted for half of the entire budget in the previous fiscal year. The share of the defense services stayed stable, but debt servicing has spiraled out of hand.
Despite the government’s goal of a primary budget surplus of close to Rs200 billion, the finance ministry will still need to borrow Rs4.6 trillion to fund its operations in fiscal year 2022-23, thanks to debt servicing costs of about Rs4 trillion. This will be the largest debt ever.
According to the sources, the 2019 budget may be announced with a primary surplus objective of almost Rs200 billion, compared to the predicted primary deficit of Rs1.6 trillion in the previous fiscal year. In an election year, the Rs1.8 trillion or 2.2 percent of GDP harsher adjustment will be difficult, and the risks of slippages will remain high.
According to the sources, a budget of about Rs9.5 trillion has been created on the basis of a 4% rise in spending over this year’s revised predictions but a one-fourth gain in revenue.