Debt servicing biggest challenge in budget

In first nine months of FY19, total debt and liabilities went up Rs6tr

LAHORE: Owing to the excessive borrowing policy of governments over the past one decade, the debt servicing has become the biggest challenge on the expenditure front in the federal budget.

Domestic and foreign borrowings might cross Rs2.25-trillion mark by the end of current fiscal year 2018-19, said All Pakistan Business Forum President Syed Maaz Mahmood in a statement.

The country’s fiscal policy over the past decade focused primarily on macroeconomic stabilisation, in response to the financial crisis, he noted. It put more emphasis on reforms to foster long-term inclusive growth by adopting advanced technology and with the deepening global integration. The APBF president said reforms would require a growth-friendly budget, upgraded tax and social spending, and active industrial policies in close consultation with real stakeholders to achieve sustainable development goals.

Amid an increasing discount rate that has now shot up to 12.25%, Pakistan’s total debt and liabilities skyrocketed to around Rs35 trillion, which were rising at a high speed in the wake of a soaring budget deficit, he pointed out.

There was no justification for making changes in the policy rate because it would further increase the debt servicing cost, he said, adding the policy rate had gone up 600 basis points with the recent hike of 150 basis points.

Quoting data of the central bank, Mahmood said in first nine months of the current fiscal year, the total debt and liabilities went up Rs6 trillion, increasing from Rs28.87 trillion in June 2018 to Rs35 trillion by the end of March 2019. Total debt and liabilities as a percentage of GDP has touched 91.2%. The overall debt and liabilities were pushed up at an accelerated pace due to a soaring budget deficit and its financing requirement, and the hike in discount rate.

Pakistan’s total debt stood at Rs33.026 trillion including the government’s domestic debt of Rs18.17 trillion and public sector enterprises’ debt of Rs1.378 trillion. On the other hand, total liabilities stood at Rs2.067 trillion at the end of March 2019.

The external debt and liabilities crossed $105 billion by March-end. The country’s external debt and liabilities went up to $105.841 billion from $95 billion in first nine months of the current fiscal year, posing a serious debt-servicing challenge.

The external debt and liabilities increased $10 billion under the tenure of the current government.

Published in The Express Tribune, May 30^th, 2019.

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