Debt and revenues.

TWO numbers released on Friday told the story of the straight and narrow path this government has to walk. The first was reported in the finance ministry's debt policy statement submitted to parliament, which said the country's overall debt had increased by 40pc in the previous fiscal year, rising by Rs11.6tr from June 2018 till September 2019. This is a massive increase and one is hard-pressed to find a precedent for such a steep rise. The second figure was released by the Federal Board of Revenue, which showed the overall revenue collection to have fallen short of its target by more than Rs100bn in the month of January, taking the overall shortfall in the tax collection target to Rs387bn. This shortfall now needs to be made up in the remaining five months of the fiscal year, or else the level of indebtedness will rise further. High debt contributes to the fiscal imbalance because it increases the cost of debt servicing, which is the single largest expenditure head in the government's fiscal account. This necessitates further revenue measures. The vicious cycle can only be broken if revenues rise and debt levels fall, but for now it seems that we are moving in the opposite direction.

Nor do the figures show signs of abatement, despite the government's claim that it has stabilised the economy by narrowing the key deficits that plagued it from 2016 onwards. In domestic debt, for example, the government accumulated an additional Rs4.3tr the last fiscal year, but in the period from July to...