Islamabad: With around a 40 per cent increase in Pakistans public debt and liabilities in 15 months, the Pakistan government has conceded major violations of the Fiscal Responsibility and Debt Limitation Act (FRDLA) for massively exceeding debt acquisition limits, a media report said.
In its debt policy statement laid before Parliament, Pakistan’s Ministry of Finance noted that the total debt and liabilities that stood at Rs 29.879 trillion at the end of 2018 fiscal had crossed Rs 41.489 trillion at the end of September 2019, showing an increase of Rs 11.6 trillion, or 39 per cent.
At the end of 2019 fiscal, the total debt and liabilities were reported to have increased by about 35 per cent or Rs 10.344 trillion to touch Rs 40.223 trillion, Dawn reported.
The report said that the FRDLA required that the federal government take measures to reduce federal fiscal deficit and maintain total public debt within prudent limits thereof.
As such, it was required to limit the federal fiscal deficit, excluding foreign grants, to 4 per cent of the gross domestic product during the three years, beginning from financial year 2018-19 and maintaining it at a maximum of three and a half per cent of the GDP thereafter.
“The federal fiscal deficit (excluding grants) was recorded at Rs 3,635 billion or 9.4 per cent of the GDP during FY 2018-19, thus, remaining higher than the threshold of four per cent,” said the debt policy statement.
In the statement laid before parliament, the finance ministry admitted to debt limit violations.
The ministry, however, justified this pointing to a series of factors, most of them emanating from its policies.
It said the one-off factors, which were not expected to carry over into FY 2019-20, contributed around 2.25 per cent of the GDP towards federal fiscal deficit. These included delay in renewing telecom licences, delay in sale of envisaged state assets and weaker-than-anticipated tax amnesty proceeds contributed around 1 per cent of the GDP. A shortfall in the transfer of State Bank profits contributed an additional 0.5 per cent of the GDP.
In addition, the Finance Ministry said some other factors were beyond the control of the fiscal authorities, which contributed to higher than budgeted federal fiscal deficit during FY2018-19.
These included a sharp rise in domestic interest rates and exchange rate depreciation (that escalated the debt servicing burden), legal constraints on the revenue side and an overall slowdown in the economy resulted in lower-than budgeted revenue collection.
Apart from fiscal deficit, it said, unprecedented revaluation loss on account of currency depreciation and build-up of liquidity buffer contributed significantly towards the increase in debt to GDP ratio during FY 2018-19.
The government’s external debt during the 15-month period increased by 36 per cent or Rs 2.8 trillion to Rs 10.598 trillion. External liabilities on the other hand increased by 160 per cent to Rs 1.6 trillion by the end of September 2019 from Rs 622 billion in June 2018.
The finance ministry, however, said it fulfilled the limit on new sovereign guarantees.