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August 11, 2019

Rupee fall ups govt debt by Rs7.5tr

Top Story

August 11, 2019

ISLAMABAD: The steep fall of rupee against US dollar and unprecedented hike in the budget deficit has pushed up debt burden of federal government by Rs7.5 trillion since the government took over last year.

Different reasons are cited for this unprecedented surge into ballooning debt burden but mainly the depreciation of exchange rate as well as massive tax and non tax revenue shortfall for paving the way for hiking the budget deficit have contributed to it.

However, Minister of State for Economic Affairs Hammad Azhar did not agree to this argument that the government was responsible for this whole mess on the economic front.

Official data of State Bank of Pakistan showed that the central government debt has gone up by Rs7.5 trillion from June to July 2018-19 as it stood at Rs31.784 trillion by end June 2019 against Rs24.212 trillion in June 2018.

The steep depreciation of exchange rate has resulted into piling of debt to the tune of Rs3.4 trillion while remaining Rs4 trillion added into debt because of unprecedented budget deficit that is all set to touch 9 percent of Gross Domestic Product (GDP). One top official who seems quite worrying on increasing fiscal imbalances disclosed that no one had any clue how the IMF programme would be managed when top finance bureaucrats had already destroyed stream of non tax revenue mainly because of their incompetence and mismanagement. “The collection of non-tax revenue has remained less than Rs600 billion which were used to be hovering around Rs1000 billion during the tenure of PML-N led government in 2016-17”, said the top official.

The sorry state of affairs does not end here as the budget deficit is escalating to 9 percent of Gross Domestic Product (GDP) for 2018-19 mainly because of massive revenue slippages on front of FBR as well as on non-tax revenue side. “The debt has ballooned manifold mainly because of managerial mismanagement as the finance managers failed to collect the desired non-tax revenues in last month of June 2019”, top official sources confirmed to The News here on Saturday.

The mismanagement on fiscal front has touched new peaks in the first year the government as both tax and non-tax revenue faced massive shortfall during the last fiscal year. How the government could justify the collection of non-tax revenue below Rs600 billion in 2018-19 when the government had collected Rs964 billion in fiscal year 2016-17 during the PML-N led government?

When contacted, Minister of State for Economic Affairs Hammad Azhar on Saturday, he said that the half of debt increased because of depreciation of rupee against dollar. He said that when PTI took over the power the current account deficit stood at $19 billion and there was no other way to suppress the demand except depreciation of exchange rate and hiking the policy rate. He said that foreign exchange reserves were protected at same level during the first year rule of PTI and reminded that it had depleted rapidly during the PML-N led regime when the current account deficit stood at $2 billion a month.

He accepted that the non-tax revenue faced shortfall but added in the same breath that this revenue would come into national kitty during the current fiscal year. He said the current account deficit had started receding now the policy rate would witness downward trends after which the fiscal deficit would also be decreased. He said that the fiscal deficit increased because of requirement of hike in debt servicing on account of piled up debt stocks obtained during the PML-N government.

He said that there were two options -- either to go for default or take tough steps such as using exchange rate, monetary policy and other measures to slash down the current account deficit. He said that those who were criticising the ballooning of debt they were ignoring other economic fundamentals of the economy facing serious imbalances on external front.

He said that the government abandoned borrowing from the SBP so increased amount of loan was raised to create buffer and currently Rs1257 billion was lying as cash balance with the government.

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