Pakistan’s total debt, liabilities rise to Rs35tr

ISLAMABAD: Amid increasing discount rates that has now hiked to 12.25 per cent, Pakistan’s total debt and liabilities skyrocketed to Rs35.094 trillion till end March 2019 and its rising at supersonic speed in the wake of yawning budget deficit.

In the first nine months (July-March) period of the current fiscal under the rule of incumbent regime, the total debt and liabilities went up by Rs6 trillion, increasing from Rs28.879 trillion in June 2018 to Rs35.094 trillion till end March 2019. The total debt and liabilities in percentage of GDP have touched 91.2 per cent. The external debt and liabilities have crossed $105 billion mark till end March 2019. The country’s external debt and liabilities (EDL) has gone up to $105.841 billion from $95 billion during the first nine months of the current fiscal year of 2018/19, posing serious challenges on debt servicing in months and years to come. The EDL increased $10 billion under the tenure of the incumbent regime.

The overall debt and liabilities has pushed up at more accelerated pace owing to increased budget deficit and its financing requirement and second hike in discount rates. The policy rate has been increased by 150 basis points, going up to 12.25 per cent from 10.75 per cent. Pakistan’s total debt stood at Rs33.026 trillion, including government domestic debt Rs18.17 trillion and Public Sector Enterprises (PSEs) debt Rs1.378 trillion. Total liabilities stood at Rs2.067 trillion till end March 2019. Total debt of the government in accordance with definition of Fiscal Responsibility and Debt Limitation Act (FRDLA) stood at Rs26.368 trillion.

When contacted to former finance secretary and reputed economist Dr Waqar Masood said on Monday that there was no justification for making changes in policy rate because it would further increase debt servicing requirements. The policy rate, he said, has gone up by 600 basis points with recent hike in policy rate of 150 basis points and it seemed at only achieving stabilisation and there was significant increase in real positive interest rate.

The psychological barrier of $100 billion mark was crossed during the third quarter (January-March) period of the current fiscal year. The EDL stood at $99 billion till end of December 2018.

The disbursement of foreign loans has so far remained slow during the current fiscal year, but the reliance on foreign debts is on the rise owing to external account gap. Current account deficit, however, narrowed 30 per cent from $19 billion in the last fiscal year, and it is projected to fall to $12.5 billion till June-end. Public external debt stood at $84 billion till March 2019 out of which the government’s external debt was standing at $68 billion.

The country owes debt to Paris Club ($11.3 billion), multilateral and other donors ($27 billion) and international bonds such as Eurobond and sukuk ($12 billion).

The country has also obtained commercial loans to the tune of $8.8 billion and a short-term loan of less than one year stood at $1.1 billion.The outstanding loan of the International Monetary Fund (IMF) stood at $5.765 billion.

Pakistan and the IMF have recently struck a staff level agreement for a fresh bailout package of $6 billion that would pave the way for resumption of policy loans from the World Bank and the Asian Development Bank.

Pakistan will also launch international bonds in the next fiscal year and therefore foreign debt is set to escalate in months and years ahead. The IMF has also done debt sustainability assessment and will make it public after an approval of the bailout package from its executive board probably by June-end or early July this year.

Debt servicing has now become the largest ticket item on expenditures front in the federal budget in the wake of huge domestic and foreign borrowings and it might touch Rs2.1 or Rs2.2 trillion for the outgoing fiscal year ending on June 30, 2019.