World Bank suggests Pakistan end subsidies amid "dangerous" fiscal deficit and debt

Islamabad [Pakistan], April 16 : Global financial institution World Bank on Sunday raised concern over Pakistan's "dangerous" fiscal deficit and debt rise suggesting Islamabad end subsidies, reported The Express Tribune.

To improve Pakistan's economy, the World Bank, in its review report, has recommended several suggestions to the country to counter the problem starting with the end of subsidies.

To improve Pakistan's economy, the World Bank, in its review report, has recommended debt management and establishing a single treasury account, saying that the country could save Rs 2.72 trillion annually by eliminating unnecessary expenses and subsidies as they eat up 70 per cent of the budget, reported The Express Tribune.

The World Bank in its report maintained that expenditures and deficits increased after the 18th Constitutional Amendment.

According to the report, the fiscal deficit of 7.9 per cent last year reached a 22-year high. It continued that the debt ratio was also recorded at a high level of 78 per cent, while the total revenue in Pakistan was 12.8 per cent of the GDP.

According to the report, Rs 315 billion could be saved by limiting the development budget, reported The Express Tribune.

It was suggested to entrust various matters including 90 per cent of the Benazir Income Support Programme (BISP) expenses to the provinces. It added that a sum of Rs 217 billion could be saved if the provinces covered 90 per cent of the BISP cost.

The report pointed out that the tax revenue share of the federal government was only 46 per cent while the expenditure stood at 67 per cent. It added that interest, subsidies and salary expenses were a major burden on the federal government, reported The Express Tribune.

The World Bank report continued that health and education were provincial matters, and it was possible to save Rs 328 billion by letting them handle them.

Meanwhile, Pakistan plans to charge affluent consumers more to fund the subsidy. Under this scheme, a two-tier pricing system will be introduced, reported The Express Tribune.

According to the minister of state for petroleum, Musadik Malik, the scheme will cover around 20 million registered motorcycles as well as rickshaws and 1.36 million cars.

The government has taken an initiative to provide a subsidy of Rs 100 per litre on petrol to provide some relief to the low-income class in the prevailing economic situation.

However, the International Monetary Fund (IMF) is unhappy with the announced scheme, reported The Express Tribune.

At a time when the government is waiting for the staff-level agreement already delayed by eight months announcing a subsidy scheme without consulting with the global lender may further delay the deal.

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