ISLAMABAD: Pakistan will return $6.5 billion external public debt in the next 15 months alone. This repayment will take the total official debt repayments during the five-year tenure of the PML-N government to a whopping $21 billion.
The Ministry of Finance shared these staggering figures with the Senate Standing Committee on Finance and Revenue on Tuesday. The $6.5 billion repayments will be made from February this year to June 2018 excluding the interest paid on the principal amount, said the ministry.
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“We have no issues in making these payments,” Federal Secretary Finance Tariq Bajwa said.
To a question about possibility of floating yet another international bond, Bajwa said the government would inform the committee about this issue at an appropriate time. The $6.5 billion repayments are only on account of the government debt and do not include publicly guaranteed debt and the private sector external debt. From June 2013 to January 2017, the PML-N government repaid $14.6 billion to external creditors. In addition to that, it has already paid over $3.1 billion on account of interest on the stock of roughly $60 billion external public debt, according to the Debt Office of the Finance Ministry.
The PML-N government came to power in June 2013 and it will complete its five-year constitutional term by June next year. During this period, it resorted to heavy and expensive external borrowings after it failed to increase exports and attract foreign direct investment.
The government has so far borrowed expensive almost $5 billion by floating international bonds and contracting short-term commercial loans with foreign commercial banks. In addition to that, it has taken heavy loans from multilateral creditors.
The ministry said Pakistan will return $858 million to foreign commercial banks in the next 15 months, taking the figure to $1.84 billion since June 2014. The country will also repay $750 million next month on account of dollar denominated bond, which will take the total bonds repayment figure to $1.25 billion.
Similarly, roughly $3 billion will be repaid to multilateral creditors between March this year to June 2018. The total repayments to the multilateral creditors will increase to $9.3 billion during the five-year PML-N term. Pakistan will repay $1.8 billion external debt to bilateral countries in the next 15 months, taking the total repayments in five years to $4.2 billion. It will also return $42 million to IMF that will bring the total repayment to the global lender to $4.53 billion.
An official of the State Bank of Pakistan (SBP) informed the standing committee that the external debt was increasing due to contraction in growth of exports and slight deceleration in growth of foreign remittances.
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He claimed that the overall trend in the financial account was positive during the current fiscal year 2016-17 due to positive impact of the China-Pakistan Economic Corridor (CPEC) related investment. However, he failed to answer a question about the ratio of equity and debt of the CPEC investment.
The official said the CPEC transactions are settled outside Pakistan and the SBP was seeking details from the Chinese companies.
The government opposed Senator Saleem Mandviwalla’s private member bill to amend Pakistan Economic Reforms Protection Act (PERA) of 1992. The 1992 law provides complete immunity to the foreign currency account holders and has become a source of outward flow of US dollars.
“The private member bill raised the question of the constitutionality of the bill, as under the Constitution only the federal government can bring changes in the laws related to the SBP,” said Bajwa.
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However, he said, the government would give serious considerations to the recommendations of the standing committee on foreign exchange regime but would not support the Bill.
Senator Mandviwalla was of the view that his bill did not violate the Constitution. The committee decided to refer the matter to Senate Chairman Raza Rabbani for a decision.