Public debt, liabilities: Miftah Ismail calls for national consensus to avert bankruptcy

ISLAMABAD: Amid rising burden of public debt and liabilities, former finance minister Miftah Ismail said that there is need of developing national consensus among all political parties and stakeholders to avert looming bankruptcy.

His offer for national consensus among political parties and other national institutions had come on the surface when the PTI-led government planned to get foreign loans up to $15 billion in next fiscal year.

The budget documents for 2020-21 showed that the PTI government has estimated to get loans and grants amounting to Rs2.222 trillion in the next fiscal year. Total public debt and liabilities peaked to Rs42.8 trillion till end March 2020. The government allocated Rs2,946 billion for debt servicing including Rs315 billion for debt servicing on foreign loans and Rs2,631 billion as debt servicing on domestic loans.

Miftah Ismail said that the incumbent regime was criticising the PML-N-led regime but the situation of public financing was heading towards stage where the PTI was going to take lead on front of accumulation of debt burden in history of Pakistan.

He was addressing online CPG seminar here on Sunday. Adviser to PM on Finance Dr Abdul Hafeez Shaikh and former finance minister Dr Shamshad Akhtar also spoke on the occasion.

Dr Shamshad Akhtar said that Pakistan had always faced problems of twin deficits and this government considered its victory to slash down the current account deficit through import compressions but all this was done in wrong way. She said that the economy was suffocated through placing higher tariff, regulatory duty and rising interest rates. It resulted in decreasing investment demand and the economy got slowdown, she added.

She said that the government took some measures to open up imports but she could not comment in abrupt manner but if the tariff was really rationalized, it would help reviving the economy. She also criticised policy of higher policy rate and said that there was need to bring the policy rate further down in order to kick-start the economic activities.

Federal Minister for Finance Dr Abdul Hafeez Shaikh said that the government took tough measures as defence and other expenditure froze and serious efforts were made to rationalise subsidies. He said that it was fact that the debt servicing consumed the largest portion of spending side and the government could not do much about it. He said that they took really tough decision keeping in view resource constraints. He said that the government did not impose any new tax in the budget and made every efforts to streamline the budgetary estimates. He said that it was historic failure of every government that the taxes and savings in percentage of GDP could not be increased.

Miftah Ismail praised the government for launching Ehsas programme and said that they should continue providing money to poor segment of the society. He proposed to the government to jack up PSDP funding and slash down the monetary policy in order to jump-start the sluggish economic activities. He said that there was also need to bring down the rate of GST from 17 percent to 15 percent.

Meanwhile, the budget documents showed that out of budgeted Rs2.222 trillion external receipts for next fiscal year, Islamabad projects receiving of budgetary support of Rs211 billion from the IMF, Saudi Oil Facility (SOF) of Rs165 billion, launching of Eurobond Rs247 billion and loans/rollover of commercial banks Rs674 billion. The budgetary support from friendly countries was envisaged at zero amount for next fiscal year.

The dried up non debt creating inflows such as possible fall in fetching exports earning, remittances and foreign direct investment in case of lingering COVID-19 pandemic, Pakistan’s desperation for getting foreign loans might further go up. The Ministry of Finance has taken reduced amount of project loans for Public Sector Development Programme (PSDP) for next fiscal year. The Economic Affairs Division (EAD) has given plans to seek $15 billion loans in the next fiscal year.