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Pakistan’s net public debt up by 35 percent

Islamabad [Pakistan]: Pakistan’s net public debt has crossed Rs. 18.28 trillion mark, rising about 35 percent during the tenure of the ruling Pakistan Muslim League-Nawaz (PML-N).

This was reported by Ministry of Finance, in response to a question from Pakistan Peoples Party ( PPP) MNA Shahida Reh­mani in the National Assembly last week, reports the Dawn.

“The volume of net public debt as on September 30, 2016 was Rs18, 277.6 billion,” the Ministry’s response said.

Total public debt stood at Rs. 13.48 trillion at the end of fiscal year 2012-13 – almost three years ago.

The major contribution to the increase in net public debt came from a 40 percent rise in domestic debt, which rose from Rs. 8.686 trillion at the end of 2013 to Rs 12.14 trillion at the end of the first quarter of the current fiscal year (FY 2016-17).

In the same period, foreign debt posted an increase of 28 percent and went from Rs. 4.796 trillion in 2013 to Rs. 6.14 trillion on September 30, 2016.

The PML-N Government paid USD 12 billion on foreign loans obtained by previous regimes.

Explaining the reasons behind the surge, the Finance Ministry said that public debt was mainly obtained to finance the fiscal deficit and was approved by the parliament.

“Some of the financing had to be done in the form of external loans, to supplement the domestic resources required to accelerate the pace of economic development and make positive contributions towards developing the country’s infrastructure base,” the Ministry said.

“These loans were obtained for financing of projects of national importance, budgetary and balance of payments support, earthquake and floods, rehabilitation assistance and import of urea and crude oil, along with building external buffers to protect against exchange rate volatility and absorb external shocks,” the Ministry added.

It explained that domestic debt was perpetual in nature and mostly refinanced year-on-year, while most of the external loans contracted by the present government were economical and dominated by long-term funding, which would be used to retire the corresponding amount of expensive domestic borrowings.

External loans are repaid through budgetary allocations based on the amortisation schedule of each loan.

In its response, the Ministry claimed that it had been able to significantly reduce economic vulnerabilities and had implemented various growth-supporting structural reforms, over the past three years.

This had resulted in an improvement in the country’s debt repayment capacity and had allowed it to control expenditures.

On top of that, economic growth was projected to continue its upward acceleration on the back of growth-supporting structural reforms, the Ministry said, adding that development projects linked to the China-Pakistan Economic Corridor in the fields of energy and infrastructure were also expected to contribute an additional two percentage points to GDP growth in the years to come.

The government also claimed to have successfully brought down the fiscal deficit from 8.2 percent of the GDP in 2012-13 to 4.6 percent in 2015-16, with a target to further curtail the budget deficit at 3.8 percent of GDP at the end of the current fiscal year, and restrict it to 3.5 percent by FY 2018-19.

Moreover, the Ministry claimed that despite repayments by the present government of foreign loans worth over USD 12 billion that were obtained by the previous governments, foreign exchange reserves currently stood at over USD 23 billion, up from the USD 11 billion mark at the end of June 2013.

It also claimed to have reduced tax exemptions, leading the tax-to-GDP ratio to increase from 9.8 percent in 2012-13 to 12.4 percent of the GDP in 2015-16, while public sector investments increased from Rs. 348 billion in 2013 to Rs 800 billion this year. (ANI)