No good news on external debt restructuring: Shamshad

ISLAMABAD: Conceding debt reaching ‘unsustainable’ levels, Caretaker Minister for Finance Dr Shamshad Akhtar has said the government is in talks with the provinces to shift responsibility of BISP, to hand over provincial PSDP projects and close down devolved departments for rationalizing expenditures.

She said there was no good news on the public debt burden on the multilateral and G-20 front except with China whereby the debt arrangement was done to the tune of $2.4 billion till 2024-25.

“Pakistan’s public debt breached limits of Fiscal Responsibility and Debt Limitation Act since 2013-14 and it has reached unsustainable levels. There is no good news on the debt burden as multilateral institutions did not permit restructuring of external debt. The G-20 had granted Debt Service Suspension Initiative (DSSI) during the Covid-19 pandemic. So far Pakistan has undertaken a debt arrangement with China of $2.4 billion till 2024-25,” she said while addressing an SDPI conference here on Thursday.

Shamshad dwelt upon all macroeconomic issues confronting Pakistan’s economy and said they were close to democratic transition, so they were going to launch an ‘economic revival package’ for achieving the objective of self-reliance and integrating the economy with regional countries.

She cautioned that talk of debt restructuring should be dealt with very carefully because it possessed repercussions. She made crystal clear that Pakistan did not have any intention to delay its repayments of external debt. The larger fiscal deficit pushed up debt burden, so the country was forced to breach the Fiscal Responsibility and Debt Limitation Act since 2013-14.

On the domestic debt front, she mentioned the government was moving on the path of re-profiling to move from short-term debt to long-term bond of 3 to 10 years to reduce the cost of borrowing. However, on external debt, she said options were limited as 44 per cent of overall public debt was in the shape of foreign loans. Around 35 per cent of external debt belonged to bilateral creditors as G-20 had granted a debt service suspension initiative after Covid-19 and Pakistan wished to see more such relief but “there was no good news on this front”. She said only debt arrangement of $2.4 billion was done with China till 2024-25. “We are exploring options of debt climate swaps of $100 million. The multilateral and bilateral institutions should go ahead with handholding,” she said, adding that Pakistan would have to raise its competitiveness and policies of anti-export bias would require to be removed.

She mentioned that textile possessed 58 per cent share of overall exports and was restricted to only limited four destinations - US, EU, China and Afghanistan. Dr Shamshad said the government would restructure the FBR to jack up revenue to GDP ratio from 9 to 15 per cent in the first phase.

“We are trying to place a fair and equitable taxation system,” she said and added that the tax base would be broadened. The customs policy and operation would be separated with the objective to facilitate trade and eradicate smuggling. The striking of Staff Level Agreement (SLA) with the IMF was good news as the government stood committed to accomplishing the Fund program. The government removed ban on imports and allowed banks to settle LCs and repartition of profits earned by MNCs. The government clamped down on currency and other smugglers and also undertook other administrative measures to stabilize the exchange rate.

The GDP growth rate, she said, would be hovering around 2 to 3 per cent for the current fiscal year. The business and investors confidence was restored. Quoting a WB report, she said Pakistan’s size of economy could touch $2 trillion if the macroeconomic stability was ensured till 2047 from existing levels of $300 billion.

The Viability Gap Fund (VGF) would be established whereby a public-private partnership would be developed to execute development projects with the participation of the private sector. All departments devolved under the 18th Amendment would be abolished at the federal level.