2024-05-12-世界银行-2023年巴基斯坦联邦公共支出审查（英）_220页_7mb

Pakistan Federal Public Expenditure Review (PER) 2023 Summary

Core Content

The Pakistan Federal Public Expenditure Review (PER) 2023 is a comprehensive analysis of the country's fiscal challenges and opportunities for improvement. It highlights the persistent fiscal deficits and public debt, which have raised concerns about fiscal and debt sustainability. The report is structured around five key questions that examine the causes and solutions for these issues.

Main Questions and Chapters

1. Why are recurrent fiscal deficits harmful to the economy? Why are Pakistan's fiscal deficits so persistent? (Chapter 1)

   • Large and persistent fiscal deficits contribute to macroeconomic volatility, crowding out private investment, and limiting long-term growth.
   • Deficits have averaged 6.2% of GDP over the past decade and increased significantly after 2010.
   • These deficits have led to a sovereign-financial sector nexus, where the government borrows heavily from the domestic financial sector.
   • Economic shocks such as the 2020 pandemic and 2022 floods have worsened the fiscal situation by increasing spending and reducing tax bases.
   • The report underscores the urgent need for fiscal space to manage such shocks effectively.

2. How can federal fiscal expenditures be rationalized for fiscal savings and the efficiency of development spending be improved? (Chapter 2)

   • Federal fiscal spending is highly rigid, with 70% of total spending allocated to pre-committed areas like interest payments, transfers, and subsidies.
   • Development spending is low, averaging 2.5% of GDP in FY22, and is significantly below regional peers like India (6.7% of GDP).
   • Poorly targeted energy and commodity subsidies are a major inefficiency. For instance, electricity subsidies accounted for 0.27% of GDP in FY22, with 77% of benefits going to the top 60% of income distribution.
   • The Benazir Income Support Programme (BISP) is a more effective and targeted transfer program, benefiting 81% of its spending to the bottom 40%.
   • Realigning spending with constitutional mandates can reduce duplication and inefficiency, particularly in areas like health, education, and social services.

3. What are the non-budgetary drivers of the debt stock and how can they be managed? (Chapter 3)

   • Public and Publicly Guaranteed Debt (PPGD) reached 78.0% of GDP in FY22, exceeding the FRDLA 2005 threshold of 60% of GDP.
   • Exchange rate depreciation has been a major driver of debt accumulation, contributing 22.5 percentage points of GDP to the PPGD stock since 2012.
   • Short-term debt strategies increase solvency risks and GFN volatility, especially under fiscal and exchange rate shocks.
   • A fragmented debt management system and reliance on short-term instruments have constrained the ability to manage debt effectively.
   • The report recommends strengthening debt management functions to improve long-term debt sustainability and reduce exchange rate risk.

4. What is the impact of federal SOEs on the finances of the Federal Government and how can they be minimized? (Chapter 4)

   • State-Owned Enterprises (SOEs) constitute a major source of fiscal support, with subsidies forming a large part of their financial needs.
   • Federal SOEs contribute to contingent liabilities and fiscal risks, which have been growing in recent years.
   • The report emphasizes the need to improve SOE management to reduce these liabilities and enhance fiscal discipline.
   • Direct fiscal support to SOEs has been costly, and a shift toward more efficient models could yield significant fiscal savings.

5. What are the avenues through which fiscal revenue collection can be enhanced? (Chapter 5)

   • Tax revenue collection is low, averaging 10.3% of GDP over the past decade, significantly below the South Asian average of 19.6%.
   • The report recommends improving tax administration, expanding tax bases, and reducing distortions through reforms.
   • Tax expenditures are a major cost to the government, with significant implications for fiscal sustainability.
   • Inclusive revenue enhancement is critical to ensuring equitable growth and fiscal space.

Key Findings and Recommendations

• The federal fiscal deficit is the main driver of the national fiscal deficit, with the Federal Government accounting for about two-thirds of total general government expenditure.
• Fiscal institutional arrangements are weak and fragmented, leading to inefficiencies and unsustainable outcomes.
• Improving targeting of subsidies and reducing regressive spending can lead to significant fiscal savings.
• Reallocating spending from inefficient subsidies to targeted programs like BISP can improve social outcomes while also enhancing fiscal sustainability.
• The report estimates that implementing the recommended reforms could generate fiscal savings of 4 percentage points of GDP, contributing to macroeconomic stability and sustained growth.

Policy Recommendations

• Rationalize fiscal expenditures by reducing rigid spending and improving the efficiency of development spending.
• Enhance domestic revenue collection through better tax administration and expanding tax bases.
• Improve SOE management to reduce contingent liabilities and fiscal risks.
• Strengthen debt management functions to reduce reliance on short-term borrowing and improve long-term sustainability.
• Realign spending with constitutional mandates to reduce overlaps and improve accountability.

Conclusion

The PER 2023 highlights the urgent need for fiscal consolidation and reforms to ensure sustainable economic growth and debt management in Pakistan. By addressing the root causes of fiscal deficits and improving public finance management, the Federal Government can free up fiscal space for productive investments and social programs, ultimately leading to greater economic resilience and long-term development.