Debt-to-GDP ratio to worsen, NA body told

ISLAMABAD: Pakistan’s debt to GDP ratio is projected to worsen over short to medium term owing to increasing fiscal deficit, the newly appointed Director General (DG) Debt Office at Ministry of Finance Abdul Rehman Warriach on Thursday informed parliamentarians.

The National Assembly Standing Committee on Finance and Revenues held its meeting under chairmanship of Faizullah, an MNA from treasury benches, in which he told the participants that it was his last meeting under as chairman because the government has appointed Asad Umar to chair this committee.

The new DG Debt Office told the NA panel that the debt to GDP ratio stood at 74 percent and it was projected that it would decline to 60 percent of GDP. He said that reasonable level of debt sustainability ranged between 60 to 70 percent of GDP.

Syed Naveed Qamar, Hina Rabbani Khar from PPP and Ayesha Ghous Pasha from PML-N raised serious questions about debt sustainability and asked the Finance Ministry to share their projections with representatives of masses. Special Secretary Finance and DG Debt Office argued before the committee that negotiations with the IMF were going on so exact projections could not be shared at this point of time; however, they assured the committee members that they could be given detailed projection of rising trends of debt in upcoming meeting.

Hina Rabbani Khar offered the government that if they wanted in-camera meeting it could be held but they must share facts with Parliamentarians. The DG Debt Office said that the IMF considers debt to GDP ratio of 70 percent in safe zone but the law of land envisages limit at 60 percent of GDP.

The DG Debt Ministry of Finance in its presentation told the committee that the debt burden in last nine months (July-March) went up by Rs3653 billion out of which Rs1421 billion was increased because of devaluation of currency so the public debt in rupee term had gone up.

The fiscal deficit, he said, was estimated at 6.5 to 7 percent of GDP that resulted into escalation of debt burden. Special Secretary Finance Umar Hameed said that there was quite peculiar situation owing to dwindling foreign currency reserves and upsurge into current account deficit.

While considering the implementation status of the previous recommendations made by the Committee to Federal Board of Revenue (FBR). Director General, FBR informed the Committee that FBR has forwarded the recommendations to Ministry of Finance with the request to abolish the regulatory duty on import of tyres in the upcoming Federal Budget, FY 2019-20. The Committee emphasized that the recommendations of the Committee should be considered on priority basis, because said recommendations were made after due deliberations with the stakeholders and Federation of Pakistan Chamber of Commerce & Industry (FPCCI) and Chambers of Commerce & Industry (CCI). The Committee expressed its displeasure on the non-compliance of the recommendations pertaining to FPCCI and CCI, which were made by the Committee in its meeting held on 15th & 16th April, 2019.

The Committee deferred agenda pertaining to the Foreign Exchange Regulation (Amendment) Bill, 2019 on the request of the Ministry of Finance and Governor, State Bank of Pakistan (SBP). While considering the Anti-Money Laundering (Amendment) Bill, 2019. The Committee members have expressed their concerns on the late submission of brief/comparative statement by the Ministry of Finance. The Committee once again directed to Ministry of Finance that Honorable Advisor may be requested to attend the meeting for briefing on the subject Bill including total public debt trends in past 10 years & current status and foreign & domestic debt and trends for the future. The Committee decided that said Bill will be discussed in the next meeting of the Committee, which will be held on 21st May, 2019.

The Committee discussed the agenda about the NBP Bangladesh scam and actions taken by the Bank against the employees of the Bank, involved in said scam. Director, NBP briefed the Committee about the measures taken by the institutional discipline wing, HR management group after receipt of KPMG report. He said that internal actions, legal actions by the external agencies and actions against Bangladesh based local employees were initiated by the Bank. The Additional Director, National Accountability Bureau (NAB) informed the Committee about the current status of the criminal proceedings against accused of said scam. Director, NBP on Bangladesh scam informed that there were some issues in the recovery process due to the demand of borrowers for right off their some portion of loans. The Committee recommended the NBP that Credit Committee and Board of NBP may be asked to prepare their recommendations for recovery of loans in Bangladesh scam.