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.
COMMENTS (12)
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Meekal Ahmed: I am talking about the nominal value that Nadir referred to not the as-a-percentage of GDP value that you are referring to. Please try and keep up!
@abdussamad:
This is standard procedure in the whole world when you take a variable and express it in terms of GDP. Nothing sinister here.
Yes, the denominator, in this case GDP, is the sum of the growth of real output plus the growth of inflation. That is why it is called "nominal" GDP. It is not saying anything about the price-output split. It is not a value judgement.
You could have a real ratio but what would you use to deflate the neumerator "debt" by?
So it is the nominal value of debt divided by the nominal value of GDP. Just as you take the nominal value of tax receipts and divide by the same nominal GDP.
Some would argue, and with some merit, that we should not be looking at GDP. We should be looking at Gross National Income (GNI) since we should be taking into account net factor income (mostly remittances) and changes in the terms of trade.
I suspect that we don't do that because in some years the terms of trade have moved sharply against us (rising food and oil prices) and GNI is less than GDP! So, they probably thought, oh well, forget it.
Remember it as to be paid back in grernback so with pak rup inn deprecation. V dx and costs inswaps its far higher in real terms manipulated it looks like a horrible number pak should default as this is the only optiowhat else can one expect from a fiscally irresponable gop
@Abdussamad? So what? Alot of Pakistans debt is denominated in ruppees, and they are paying it back in ruppes. Inflation benefits the debtor, not the creditor so the debt would go down accodingly. The rupee may have lost a quarter of its value, but so has the dollar, and our real GDP has grown faster than the population growth rate, which either way is irrelevant to the discussion at hand. As for tax revenue as a % of GDP, well thats no surprise, as every tax raising measure is opposed by opposition parties and vested interests.
Doubling of GDP in 4 yrs ... lol Thats not possible even in the best managed countries in the world. People don't believe this report... its not possible anywhere in the world....
Nadir: That doubling of GDP is in rupee terms and does not take into account inflation. I bet the rupee is worth less than a quarter of its value back in 2008. Real GDP growth is what matters and that hasn't kept up with the growth in population. Also Pakistan's tax to GDP ratio has gone down so that is why the government keeps printing money to finance its expenses.
Democracy is the BEST REVENGE !!! Welcome to ISLAMIC REPUBLIC OF PAKISTAN.. We have still 1 year to go with our chosen democratic government...
A ratio of around 60% is not a big deal. What we need to worry about is what is the projection in the near term? This should be in the IMF report under their Debt-Sustainability Analysis comparing a "Baseline" with a "Reform" scenario.
What nonsense. If the debt to GDP ratio has improved then the total amount is irrelevant!
The following sentences make it appear as if GDP growth is a bad thing:
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.
A doubling of GDP would be an achievement anywhere else, but moving numbers around to make a catchy headline seems more important.
this is some Zionist propaganda. Americans, Europeans, Israelites, and RAW are behind this.
this is FIFTH generation warfare and we are in a stage of war. west should give the Nobel Prize to allama iqbal to show that they respect pakistan, and india should give md. ali jinnah a "Bharat Ratna" , to show that they accept the creation of pakistan.
pakistan will reach the moon in 5 years..inshah allah.
And we have to start repaying IMF loans from March.... this month. From where r we getting the $2 billion ??? More loans ?? this looks ridiculous, as with every other aspect here...
this country has been devastated!!!