The fiscal deficit is a term used to indicate the difference between the total revenue of a government and its expenditure. An economy can face difficulties if its spending exceeds its revenues as the state will not be able to service the payments for the spending on goods and services. One of the major problems in Pakistan’s economy is fiscal deficits. In a recent report, it was shown that Pakistan’s fiscal deficits rose from 5.8% in the previous year to 6% in the year 2018-2019. These fiscal deficits are poisonous to the current situation of Pakistan’s economy in various ways mentioned below:
- Rising financial deficits means the state has to borrow funds from IMF which means a boom in debt for the nation.
- The fiscal deficits are alarming signals of weakening currency and falling foreign exchange reserves.
- When an economy faces fiscal deficits continuously, it means sustainability is hard to achieve, recording a history of a declining economy and a dark future for the country as well.
- The balance of payment crisis for Pakistan is majorly caused by the fiscal deficits which are weakening the ability of government to cater the debt.
Fiscal deficits do influence the economic growth of Pakistan. The major problems including this are the root causes of a slow economic growth rate of the country.