Big issue is debt payment: Dr Ishrat

WASHINGTON: Pakistan's defence expenditure are not the big elephant anymore, it is the payment of debt amounting up to Rs1,500 billion that is the country's major challenge, said Prime Minister Imran Khan’s Adviser on Institutional Reforms and Austerity Dr Ishrat Husain.

While speaking at the Pakistan Policy Symposium on Thursday, Ishrat Husain said, defence expenditure is only three percent of the gross domestic product (GDP).

"[Total] Rs1,500 billion out of Rs4,500 billion we collect, goes on debt servicing cost, which is the big elephant,” he said. "That can only be tackled if we reduce our borrowing, both external and internal."

He added, "We decided to approach the International Monetary Fund (IMF) as our financial gap is wide." The public interest would be considered during talks with IMF, after which the World Bank and other international institutes would also come forward to help Pakistan, the economist said.

Speaking about the electricity crisis plaguing the country, the economist said it was under control, but the country was facing issues because of some distribution companies. “The problem is in the distribution companies. Out of the nine companies, four are causing 75 percent of the losses."

Husain continued, "All the deficit which is being accumulated in circular debt is originating from these four companies.” He added, “So they have to find specific solutions either to privatise those to give them to management contracts or bring about new managers.”

Moreover, Dr Husain said, a decision has been taken to reform the Federal Board of Revenue on technical grounds so that the money collected in taxes can be increased and those defaulting on payment can be identified. "In Pakistan, only 3.5 million people pay taxes out of 12 million. We have to increase the tax to GDP ratio," he added.