FM says debt should be curtailed

ISLAMABAD: Dr Shamshad Akhtar, the caretaker Mminister for finance and planning, on Wednesday said debt was a reality for growing economies and Pakistan was no exception as it had to pursue its high growth ambitions, expand its infrastructure, and invest in the social uplift.

"Public debt should not be measured in isolation as it is governed under Fiscal Responsibility and Debt Limitation Act (FRDLA), 2005," she said while addressing a seminar titled ‘Public Debt Issues, Challenges and Way Forward’.

“According to this act, public debt has to be reduced to 60 percent by 2017-18 and thereafter a 15-year transition has been set towards a debt-to-GDP ratio of 50 percent.” Akhtar said the public debt witnessed average annual growth of 11.3 percent during FY2013 to May 2018.

She said the public debt mainly increased due to fiscal deficit, International Monetary Fund (IMF) loan, balance of payments requirements and rupee depreciation against the dollar. “Around 33 percent of total public debt is denominated in foreign currencies with an average life of around 8 years,” Akhtar said.

During the last five years, the minister said, several structural changes were witnessed in the composition of external public debt with increased share of commercial borrowing; however, there was a need to reduce reliance on this source of financing.

She suggested that the government should emphasise on obtaining concessional and long-term external financing to avoid higher debt servicing and putting in place fiscal consolidation measures.