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November 15, 2012

Four years’ debt more than double of last 60 years: SBP

November 15, 2012

ISLAMABAD: The State Bank of Pakistan’s Monetary Policy Information Compendium October 2012 report shows that Pakistan’s total debt and liabilities have reached an alarming figure of Rs14,561 billion as against Rs6,691 billion of pre-2008 figure.
It means that the total debts and liabilities of the last four years are more than double the total of such amounts accumulated during the first 60 years of Pakistan’s independence. The debt/liabilities burden added during the present PPP tenure is Rs7,870 billion. It was Rs6,691 till June 2008.
In view of these figures, every Pakistani is presently burdened with the debt and liabilities of Rs80,894 as against Rs37,170 in early 2008, an addition of Rs43,724 during the present government’s tenure.
In a country in which according to the government’s own reports poverty has risen and 58 percent of the population faces food insecurity, this additional burden means more miseries for the future generations of Pakistan.
It is feared that by the end of PPP’s tenure, the total debt and liabilities may cross Rs16,000 billion as the government continues to borrow billions of rupees daily from the banking sector. During the last fiscal year — 2011-2012 — the government added Rs2,000 billion or almost Rs5.5 billion per day.
Compiled by the Monetary Policy Department of the State Bank, the report said that the stock of total debt and liabilities increased by Rs2 trillion during FY12 mainly due to an increase in the government’s domestic debt.
Sector-wise breakdown of the total debt and liabilities (Rs14,561 billion) as per the State Bank of Pakistan is: govt domestic debt Rs7,638 billion; govt external debt Rs4,365 billion; debt from IMF Rs694 billion; external liabilities Rs227 billion; private sector external liabilities Rs575 billion; public sector enterprises external debt Rs144 billion; public sector enterprises domestic debt Rs281 billion and commodity operations Rs438 billion.
According to

the statistical supplement of the State Bank of Pakistan’s Annual Report 2009-2010, the total debts and liabilities of the last 60 years till June 2008 were Rs6,691 billion, meaning thereby what successive governments in Pakistan could not accumulate in six decades, has been accumulated by the present government in almost four years.
Experts believe corruption, misrule, massive tax evasion and poor economic policies have burdened the nation with such an alarming rise in the total debts and liabilities.
Dr Shahid Siddiqi, a known economist and banker, told The News that the domestic debt alone has almost touched Rs8,000 billion. He said that in the federal budget for the year 2012-2013, the federal government has allocated Rs926 billion for payment of interest on debt but he feared this figure would reach Rs1,100 billion by the end of the fiscal year.
Because of huge government borrowing from the banks, it is said, the pre-tax profits of the banking sector has risen from Rs63.2 billion in calendar year 2008 to Rs170 billion in 2011. Now, he said, the banks instead of performing their real job of advancing loans to the private sector, businessmen etc for growth of economy, are giving maximum loans to the government where income from interest is guaranteed and no risk is involved.
Dr Siddiqi said that between 2008 and 2011, the total advances from the banking sector recorded a rise of Rs169 billion whereas investment portfolio recorded a rise of Rs1,967 billion, bulk of which has gone to the government. It all results in destruction of economy, slow growth rate, rise in unemployment, rise in inflation besides piling of debt burden on the government and the people.
Rana Asad Amin, adviser to finance minister, when approached, said that the total debt and liabilities have increased phenomenally because of three main reasons. First, the government acquired the IMF loan of US$7.4 billion; second, the fall of Pak rupee against US$ from 60:1 in early 2008 to 96:1 now and finally off-budgeted item relating to loan liabilities of public sector enterprises have been converted into budgeted item, thus adding a burden of Rs390 billion.
Meanwhile, Fawad Chaudhry, adviser to PM, however, said that total debts and liabilities had not increased when compared to the debt-to-GDP ratio. He said that the devaluation of Pak rupee against the US dollar had primarily triggered a rise in total debts and liabilities but argued that the devaluation has improved the exports whereas remittances have also risen to a record level.

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