Public debt projected to swell 47pc at Rs45trln in five years

ISLAMABAD: Pakistan’s total public debt is expected to climb around 47 percent to Rs45.573 trillion in the next five years, a senior official said on Thursday.

The ministry of finance estimated total public debt at Rs31.019 trillion till the end of the last fiscal year of 2018/19, the official of the finance division said, citing the ‘public debt management FY20-FY24’ document.

The finance ministry presented the document before the National Assembly Standing Committee on Finance chaired by Asad Umar. “The projections tabled by the finance division were fully endorsed by the IMF (International Monetary Fund),” the official said, requesting anonymity.

The finance ministry’s document showed that it would take five years for total public debt to reach near the limit of 60 percent of GDP set under the Fiscal Responsibility and Debt Limitation Act 2005. Total public debt-to-GDP ratio is projected at 79.4 percent in FY2020. This would fall at 76.8 percent in FY2021, 73.5 percent in FY2022, 70.1 percent in FY2023 and 66.5 percent in FY2024.

It is, however, yet to be seen that how the government would achieve its ambitious target as the Pakistan Tehreek-e-Insaaf-led government pushed up the debt to the tune of Rs10 trillion just in one year.

No discussions could be held on the subject during the meeting. The parliamentarians argued that the report was just handed over to them and they required time to absorb it before discussing it in details.

Ministry of finance projected fiscal deficit at 7.1 percent of GDP in the current fiscal year of 2019/20. The fiscal deficit was expected to narrow at 5.2 percent in the next fiscal year, lowering further at 3.7 percent in FY2022, 2.6 percent in FY2023 and 2.3 percent in FY2024.

Revenue and grants were estimated at Rs7.246 trillion in FY2020, Rs9.012 trillion in FY2021, Rs10.720 trillion in FY2022, Rs12.198 trillion in FY2023 and Rs13.442 trillion in FY2024. Expenditure is, however, expected to surge 44 percent to Rs15.048 trillion over the five-year period.

Sources of domestic debt – T-bills, Pakistan Investment Bonds, and national saving certificates – continue to form major portion in the portfolio composition. Domestic debt is estimated at Rs22.521 trillion in FY2020, Rs24.192 trillion in FY2021, Rs25.310 trillion in FY2022, Rs25.917 trillion in FY2023 and Rs26.803 trillion in FY2024. External debt from multilateral and bilateral lenders, Eurobonds / international sukuks and commercial lenders is estimated to increase around 47 percent to Rs18.770 trillion in FY2024 from Rs12.769 trillion in FY2020.

The government planned to diversify sources of domestic and foreign fund inflows. It would increase issuance of Islamic instruments, and medium-term floating rate and zero coupon bonds, the finance ministry’s document said.

The NA panel further advised the ministry of commerce to give its inputs along with the central bank’s feedbacks with regards to implications of generalised system of preferences plus to the committee.

Ayesha Ghous Pasha, chairperson of the NA panel’s sub-committee presented its report on terms of reference to recommend measures for controlling inflation. It was decided that the report would be placed in the agenda of the upcoming meeting for deliberations. The State Bank of Pakistan (SBP) informed the committee that seven years plan on Islamic banking was underway. A comprehensive framework would be brought within two months under the Eradication of Riba Bill, 2019.

The committee directed the SBP to speed up the work on the bill and decided to appoint a sub-committee under the supervision of lawmaker Raza Nasrullah.

The NA panel on finance further discussed the ‘Islamabad Capital Territory Prohibition of Interest on Private Loans Bill 2019’ moved by lawmaker Akbar Chitrali and directed the ministry of finance to furnish the detailed comments on the subject.

The committee said a request must be sent to the ministry of interior to get its views regarding enforceability of the bill in Islamabad capital territory. The committee deferred the Small Business Finance Corporation (Amendment) Bill 2019 due to the absence of mover.