The Federation of Pakistan Chambers of Commerce and Industry (FPCCI’s) Businessmen Panel (BMP) has sought a long-term strategy amidst high cost of debt servicing due to heavy loans, jumping to over 87% of the GDP as the federal budget deficit has shot up to Rs1.4 trillion in first half of 2020-21. FPCCI BMP Chairman Mian Anjum Nisar observed that the budget deficit is going up despite the government claim of tight control over expenditures, while the only main head of expenditure that remains out of control is the debt servicing cost that jumped by 15% to nearly Rs1.5 trillion. In a statement on Saturday, he opposed the excessive borrowing policy of previous governments, as the present government has also added an additional Rs11.35 trillion in the total public debt during the first two years in power, which is more than the total debt the previous government has taken in its five-year term. Mian Anjum Nisar added that Pakistan’s fiscal policy continued to focus primarily on macroeconomic stabilization, in response to the financial crisis, instead of putting more emphasis on reforms to foster long-term growth through industrialization by adopting advanced technology. He sought growth-friendly policies, upgraded tax and social spending, and active industrial strategies in close consultation with real stakeholders to achieve sustainable development goals. In terms of size of the economy, the budget deficit remained at last year’s level but in absolute terms the deficit went up, he said and added that the government had set the federal budget deficit target at Rs3.43 trillion or 7.5% of GDP while it has obtained Rs1.2 trillion in loans to finance the deficit. Quoting the figures, the Chairman FPCCI BMP said the net federal revenue fell short of the expenditure incurred on the two largest heads – debt servicing at Rs1.5 trillion and defence at Rs505 billion while defence spending has remained less than the previous year. Overall, the total government expenditures increased 7% to Rs3.2 trillion during the July-December period. But the entire increase was on account of current expenditures, as development spending fell below last year’s level. The government is exercising tight control over the development and defence spending, which has helped contain the deficit despite a significant surge in debt servicing cost due to high borrowing. Anjum Nisar observed that over 40 percent of the additional debt in the past two years is only because of debt servicing expenditures while about 30 percent due to rupee devaluation. He flayed the economic managers for keeping the interest rate artificially high at 13.25% in the past, besides devaluing the rupee more than the requirements, contributing most to lift the public debt. Amidst consistently rising markup rate, Pakistan’s total debt and liabilities skyrocketed to around Rs36.3 trillion, which were rising at a high speed in the wake of a soaring budget deficit, he added. He said that Pakistan foreign debt and liabilities have been increasing rapidly over the last several years. The government is forced to borrow heavily from external sources, including multilateral and bilateral creditors, and commercial lenders, in order to meet its foreign debt repayment obligations, as well as to finance its budget. Its growing need for dollars has compelled the country to periodically knock at the doors of the IMF over the last three decades, at the cost of economic growth, to avert potential defaults on foreign repayment obligations and shore up forex reserves. With cheaper and softer bilateral and multilateral flows becoming scarce, the government’s reliance on expensive foreign commercial debt is rising.