Senate body seeks roadmap to reduce debt

ISLAMABAD: The Senate Standing Committee on Finance expressed concerns over the accumulation of public debt at a higher pace compared to what the government claimed, and has asked the economic managers to share the future roadmap for reducing the debt.

“Pakistan has obtained gross foreign debt to the tune of $7.439 billion in the first 11 months of fiscal year 2016-17 and made repayments of $3.628 billion so net increase in foreign loan stood at $3.811 billion, during this period of FY17,” Finance Ministry briefed the Senate panel which met under the chairmanship of senator Saleem Mandviwalla at the Parliament House on Wednesday.

Federal finance secretary Shahid Mehmood and DG Debt Office Ehtasham Rashid briefed the committee about debt situation and said the net increase in foreign borrowing jumped up by 13.9 percent in 2014-15, 11 percent in 2015-16 and so far seven percent in July-May period of fiscal 2016-17. The foreign debt stood at $58 billion.

However, Mandviwalla as well as senator Mohsin Aziz, who belongs to PTI, did not seem to agree to the Finance Ministry’s viewpoint and both were unanimous in stating that the foreign debt increased at a much higher pace of 18 to 20 percent instead of the seven percent the government claimed.

“The remittances have declined this year, and mainly due to the flawed foreign policy of the government,” said senator Ilyas Bilour of the ANP. PTI senator Mohsin Aziz said that Bangladeshi taka was stronger than the Pakistani rupee, and not only were their remittances higher but their exports had topped $40 billion.

The committee discussed the debt position of the country up to May 2017, which stood at $58 billion for foreign loans, whereas the domestic debt was Rs12,956 billion with an increase of Rs1.18 trillion in 2016-17 over the previous fiscal year, 2015-16.

Aziz said foreign debt has increased by around 18 -20 percent in a year. The committee members pointed out that Pakistan gained through fluctuation in exchange rate of other currencies and benefitted because of depreciation of Yen and Euro against US dollar. The committee argued that it was cosmetic as these currencies could become strong again, and the loan might increase at the time of repayment.

The Standing Committee on Finance also expressed concerns over the high domestic debt, and its members said excessive government borrowings made commercial banks less interested in lending to the private sectors.

The committee directed the Finance Ministry to prepare a paper highlighting options for the repayment of debt, as depending on the Federal Board of Revenue’s (FBR) collection only was not a viable option.

“We need to consider various options – how to generate money in the next five or ten years,” senator Mandviwalla said.   Senator Mohsin Leghari pointed out that the FBR had held huge refunds to maintain the books, and was also seeking advance tax from all sectors to meet its targets.

Khawaja Tanveer, member, IR Operations, informed the committee that the FBR would make all out efforts to settle the stuck up in refunds with stakeholders’ consultation and assured the senators that it would be done without wasting further time.

Tanveer said the FBR cleared sales tax refunds amounting up to Rs1 million which would benefit majority of small exporters. Now the remaining refunds, for which the RPOs were cleared till April 30, 2017, would be cleared on August 13, 2017, he added.

He said the whole concept of value-added tax could not be streamlined without paying refunds, so this would be looked into for clearing the amount. It would be shocking if the industry and FBR did not agree to the figure of refunds, and efforts were underway to get a clear picture following which a strategy would be devised to clear the due amount, Khawaja Tanveer concluded.