Public debt and liabilities swell to Rs35.09tr

ISLAMABAD: Pakistan’s public debt and liabilities (domestic and external) have been recorded at a worrisome figure of Rs35.0954 trillion by end-March 2019, which has more than doubled since 2013 when it was recorded at Rs16.338 trillion.

In 2008, Pakistan’s total debt and liabilities (external and domestic) were Rs6.69 trillion, when General (R) Pervaiz Musharraf left the power, but at the end of five-year PPP-led government in 2013, it rose to Rs16.34 trillion. Then at the end of Nawaz Sharif’s government in 2018, it jumped to Rs29.88 trillion and now it has furthergone up to Rs35.09 trillion.

If today, Pakistan decides to retire all its public debts, it has to forego more than nine-tenth (or 91 percent) of its Gross Domestic Product (GDP). Pakistan’s GDP volume is at Rs38.558 trillion at present.

This also indicates that Pakistan violated the fiscal responsibility and debt limitation act (FRDLA) which calls for limiting debt to GDP ratio below 60 percent.

It indicates that every Pakistani is indebted with Rs1,649,22 which is several times more than what the government spends on health and children education, Pakistan’s Economic Survey 2018/19 revealed. It recorded Pakistan population at 212.8 million.

Dr Abdul Hafeez Shaikh, adviser to the PM on Finance, Revenue and Economic Affairs while launching the survey said when this government came in power, the Pakistan’s debt and liabilities were Rs31 trillion, and due to that huge piled up debt, the new government has to take loans to pay back the interest on these loans. He said that in next financial year, the government will have to spend around Rs3 trillion on debt servicing.

Regarding PTI-government’s borrowing, he said that during the current government, the foreign debt has increased by Rs2.824 trillion adding that out of it, Rs1.603 trillion was increased due to rupee devaluation.

He said that during last nine months, the government has mobilised (borrowed) $9.2 billion from friendly countries for foreign exchange reserves support. The survey says that during the first nine months of the incumbent government, public debt (local and foreign) has increased by Rs3,655 trillion.

During first nine months of current fiscal year, external debt and liabilities (EDL) recorded an increase of $10.6 billion to stand at $105.8 billion at end March 2019 out of which public debt was $74.2 billion. External public debt increased by around $3.9 billion during first nine months of current fiscal year compared with the increase of $6.7 billion witnessed during the same period last year. It indicates that if the rupee depreciates by one rupee, it amasses Rs105.8 billion debt on the economy.

Borrowing from commercial sources (foreign commercial banks and Eurobonds/Sukuks) have relatively increased during the last few years, however, external public debt still largely comprises multilateral and bilateral sources which cumulatively constituted 78 percent of external public debt portfolio at end March 2019. These multilateral and bilateral loans are contracted at concessional terms (low cost and longer tenor) and are primarily utilised to remove structural growth anomalies and promote reform in the areas of energy, taxation, business, trade and education. These development loans are, thus, deployed to the increase the total output of the country and in-turn the debt repayment capacity.

PUBLIC DEBT SERVICING:

On public debt servicing (paying interest and principal amount) government spent Rs1.975 trillion during first nine months of current fiscal year against the annual budgeted estimate of Rs2.396 trillion. Domestic interest payments constituted around 65 percent of total debt servicing due to higher volume of domestic debt in total public debt portfolio.

Domestic interest payments were recorded at Rs1.277 trillion during first nine months of current fiscal year primarily driven by payments made against Market Related Treasury Bills (Rs299 billion), Treasury Bills (Rs290 billion), National Savings Schemes (Rs272 billion) and Pakistan Investment Bonds (Rs268 billion).

During first nine months of the current fiscal year, servicing of external public debt was recorded at $5,608 billion. Segregation of this aggregate number shows repayment of $4,139 billion towards maturing external public debt stock while interest payments were $1,470 billion.