In the midst of allegations of bad governance, the federal government has almost doubled national debt during its four years in power.
The country’s total public debt (excluding liabilities) swelled to Rs11.73 trillion by the end of December 2011, reveal official documents.
The coalition government, led by Prime Minister Yousaf Raza Gilani, has added Rs5.7 trillion to the national debt, which is 94 per cent higher than the level in June 2008. This comes to an increase of Rs4.2 billion per day in the last around four years.
Only in calendar year 2011, the government added Rs1.08 trillion to the public debt. Total public debt in December 2010 stood at Rs10.7 trillion.
In terms of total size of national economy, the public debt stood at 56.1 per cent, an improvement of around three percentage points in four years. In June 2008, total public debt had been estimated at 59 per cent of national output.
An official of the finance ministry said the improvement came mainly because of an increase in the gross domestic product (GDP). In 2008, the GDP stood at Rs10.2 trillion that has soared to Rs20.9 trillion, according to the documents.
In terms of total revenues, the public debt is 471.8 per cent. This year, the finance ministry has estimated total revenues at Rs2.5 trillion, including tax and non-tax revenues.
As of June 30, 2008, the public debt stood slightly above Rs6 trillion that amounted to Rs34,500 per Pakistani (considering the current size of the population). But during the tenure of the present government, the burden has almost doubled to Rs65,144.
In addition to the debt, outstanding liabilities stand at $6 billion (Rs540 billion). By adding liabilities to the debt, total national burden comes to Rs12.3 trillion or Rs68,144 per person.
In terms of GDP, total debt and liabilities stood at 61.1 per cent. According to the Fiscal Responsibility and Debt Limitation Act of 2005, the country’s total debt should not exceed 60 per cent of GDP.
The sharp increase in the debt burden has been attributed to rupee deprecation and large budget deficits due to increasing power subsidies and interest payments on debt stock. For the current fiscal year, the government has estimated debt servicing at Rs791 billion, which is slightly over 40 per cent of tax revenues. In the first half, the government has spent Rs397.2 billon on interest payments, according to the finance ministry.
Independent economic experts and the State Bank of Pakistan criticise the government for its inability to manage the debt. They say a massive rise in short-term liabilities over the last four years has led to an increase in debt servicing cost besides exposure to rollover risks.
According to the documents, the government has borrowed Rs6.9 trillion from domestic sources, which is Rs3.6 trillion or 110 per cent higher than June 2008 level. Borrowing from international sources remained at Rs4.9 trillion, slightly over Rs2 trillion or 75 per cent higher than June 2008.
In June 2008, total domestic debt was Rs3.3 trillion while external debt stood at Rs2.8 trillion.
The Debt Coordination Office of the finance ministry has already warned that high public debt can adversely affect capital accumulation and growth because of higher long-term interest rates, inflation and greater uncertainty about prospects and policies.
Published in The Express Tribune, March 7th, 2012.
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