ISLAMABAD: The federal government has sought approval of National Assembly to borrow over Rs15 trillion in new financial year to service its maturing public debt, which will be the highest ever borrowing and 44 per cent more than the outgoing year, underscoring Pakistan’s heavy indebtedness.
Finance Minister Ishaq Dar on Tuesday placed various demands before National Assembly for borrowing the huge sum amid his desperate efforts to downplay the country’s total debt and its implications for the economy. The loans will be obtained during the fiscal year 2017-18, starting from July 1.
Rs1.64tr earmarked for debt servicing
Independent economists have been warning about a ‘debt trap’ but all these warning are falling on deaf ears.
Over Rs15 trillion worth demands were placed before the National Assembly under Article 82 (I) of the Constitution as the Charged Expenditures. In case of ‘Charged Expenditure’, the National Assembly can only debate but cannot veto the spending bill.
The Rs15 trillion debt servicing related spending bill is Rs4.6 trillion or 44 per cent higher than the borrowing in the outgoing fiscal year.
Borrowing and debt servicing the fait accompli
Except for roughly Rs1.4 trillion that will be part of the federal budget, the rest of the amounts will not be booked in the budget and will be directly borrowed from domestic and foreign markets to repay and service the loans obtained in the past.
As against Rs8.38 trillion borrowing in the outgoing fiscal year, the finance minister sought Rs13.16 trillion for repayment of the domestic debt in the next fiscal year, which is over 57 per cent more than the previous year. The finance minister has placed another demand for Rs1.23 trillion to service the domestic debt.
Social sector crowded out by debt servicing cost
For the next fiscal year 2017-18, the federal government has projected its budget deficit at Rs1.826 trillion, which is equivalent to 4.7 per cent of Gross Domestic Product. The federal government will bridge this gap by borrowing Rs968 billion from the domestic market, Rs511 billion from foreign countries and Rs347 billion as provincial cash surpluses.
To repay the foreign loans, the Finance Minister has sought Rs286 billion in the new fiscal year, which will be obtained from abroad. However, their interest cost will be booked in the budget. The minister has sought another Rs132 billion to pay interest on the foreign loans.
In addition to that, the finance minister has placed Rs39.7 billion demand before the National Assembly to repay the short-term foreign loans.
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