KARACHI: Pakistan’s public debt rose 1.08 percent to Rs32.130 trillion in the first five months of the current fiscal year of 2019/20 from Rs31.786 trillion at the end of FY2019, the central bank data showed on Wednesday.
The State Bank of Pakistan’s (SBP) data showed that the domestic debt increased 3.27 percent to Rs21.410 trillion at the end of November. The foreign debt, however, fell 3.03 percent to Rs10.720 trillion.
Debt accumulation was due to higher financing requirement by the government to fund the budget deficit. Below-than-desired revenue collection and increased interest payments on domestic debt amid tight monetary policy also led to the build-up of domestic debt.
The government continued to borrow from domestic sources to finance its current expenditures.
The government sticks to its commitment of zero borrowing from the central bank. So, it has built up its deposits with banks to crate cash buffers for meeting the revenue-expenditure gap due to lack of funding sources.
Nonetheless, the decline in external debt was driven by improvement in the current account balance, appreciation in the local unit against the dollar and higher debt repayments.
The current account deficit narrowed to $1.821 billion in July-November FY20 from $6.733 billion a year earlier.
The rupee has appreciated about 5 percent since June last year.
Moreover, revaluation gains due to the depr eciation of major currencies versus the greenback also contributed to the slowdown in foreign debt.
But the IMF’s two tranches of $1.440 billion and $1.3 billion loan disbursement from Asian Development Bank have increased the stock of external debt.
The, IMF, in its latest report said Pakistan is committed to sustaining the progress on fiscal adjustment to place debt on a downward path.
“The planned reforms include strengthening tax revenue mobilization, including the elimination of tax exemptions and loopholes, and prudent expenditure policies,” it said.
Preparations for a comprehensive tax policy reform should start early to ensure timely implementation.
The government posted a primary surplus of Rs200 billion in July-September FY20.
The IMF sees debt continues to remain sustainable over the medium-term, given the broadly unchanged macroeconomic framework, the policies to date, and the authorities' policy commitments ahead.
However, the Fund warned that debt sustainability had become the subject to somewhat higher risks due to the fiscal underperformance in FY2019, a higher debt outturn, and higher financing needs.
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