$4.1 bn added to foreign debt in 27 months: Dar

ISLAMABAD: As the foreign currency reserves touched the $21 billion mark for the first time in the country’s history, Minister for Finance Ishaq Dar said that the net addition to foreign debt was standing at only $4.1 billion in the last 27-month rule of the PML-N-led government with an average cost of 3.03 percent.

Dispelling the impression that the foreign reserves were built up with the IMF loans, the minister said in an exclusive interview with ‘The News’ on Wednesday that the IMF’s net contribution in reserves was less than $300 million as the Washington-based lender provided $4.765 billion but Islamabad paid back $4.5 billion on loan that was obtained during the PPP-led regime.

In an exclusive interview with this scribe at his ministerial office at the Q Block (Finance Ministry), Senator Ishaq Dar said that Pakistan’s foreign currency reserves had touched the $21 billion mark after receiving the IMF tranche worth $498 million today (Wednesday) on completion of the ninth review and release of of the 10th installment.

“We have defeated the threat of default which was hovering over the country in June 2013 when PM Nawaz Sharif assumed power after winning the last general elections,” he said and added that the foreign reserves were built up without much net contribution of the IMF.

He said that now he would address the misperception about the increasing debt burden within parliament and outside parliament after completing homework.

The minister said with full confidence that now the stage was set when the government would focus on jacking up the growth trajectory after achieving stabilisation on macroeconomic front.

The minister made it clear that Pakistan just received less than $300 million net inflows from the IMF during the tenure of the current government as Islamabad obtained $4.765 billion from the IMF under the Extended Fund Facility (EFF) but paid back $4.5 billion on the loan obtained during the PPP-led regime, indicating that the net addition was less than $300 million on account of IMF contribution.

While sharing the extensive working done by the Finance Ministry on public debt in the last few weeks, Ishaq Dar said that the stock of external debt stood at $47.9 billion on June 30, 2013 which pushed up to around $52 billion on September 30, 2015, witnessing an upsurge in foreign debt by $4.1 billion. “It’s wrong perception that we have obtained expensive foreign loan as the average cost of foreign debt stands at just 3.03 percent,” he added. The domestic debt, he said, stood at Rs9,500 billion on June 30, 2013 which increased to Rs12,700 billion, indicating an increase by Rs3,200 billion. The average cost of domestic debt stands at 10.1 percent, he added.

The total public debt stood at Rs2,496 billion on June 30, 1999 which had gone up to Rs5,850 billion on March 2008 when the PPP-led government took over the power. The public debt stood at Rs14,300 billion on June 30, 2013 which increased to Rs18,100 billion on September 30, 2015, so the net increase in public debt was Rs3,800 billion.

When asked about the debt sustainability issues, he said that until Pakistan overcame the budget deficit and current account deficit, the practice of obtaining loans would continue.

To another query regarding the government’s strategy to build up reserves without net addition in foreign loans, the minister admitted that spot purchases of dollars and fluctuation in other currencies helped the government increase its reserves position.