ISLAMABAD: The Finance Ministry has started working on a plan to limit fiscal deficit to four percent of the gross domestic product during the next three years.
“The plan will hopefully reduce the total public debt by 0.5 percent every year,” a source at the Finance Ministry told Customs Today.
The source said that through the Finance Bill 2016-17, the Finance Ministry has announced to take all appropriate measures to reduce the fiscal deficit, excluding foreign grants and maintain it within limits.
As per law, both the domestic and foreign debt can’t exceed the 60 percent of the total GDP, however, in recent years, level of national borrowings fell in between 62 to 63 percent of the GDP, but neither the government nor any other state institution is highlighting this anomaly.
The source said that limiting the federal fiscal deficit excluding foreign grants to four percent of gross domestic product during the three years, beginning from the financial year 2017-18 and maintaining it at a maximum of three and a half percent of the gross domestic product thereafter.
Moreover, the source said that within a period of two financial years, beginning from the financial year 2016-17, the total public debt would be reduced to 60 percent of the estimated gross domestic product.
Furthermore, the source said that these procedures would reduce public debt to 0.75 percent every year to 50 percent of the estimated gross domestic product and thereafter maintaining it to 50 percent or less of the estimated gross domestic product.
Referring to the recently approved amendments in the Fiscal Responsibility and Debt Limitation Act, 2005, the source said that reduction of federal fiscal deficit and ratio of public debt to gross domestic product to a prudent level by effective public debt management was top objectives of the Ministry’s proposed mechanism.
