PTI govt claims borrowing only Rs4.11tr in 15 months

Finance ministry says other factors to blame for 40% increase in debt

ISLAMABAD: The finance ministry on Sunday said the government had borrowed only Rs4.11 trillion in 15 months to finance the budget deficit and there were other factors responsible for the country’s total debt and liabilities increasing by Rs11.61 trillion or 39% during this period.

According to a statement issued by the ministry, the figure of total debt and liabilities consisted of five components —total public debt, public sector entities’ debt, debt for commodity operations, foreign exchange liabilities of the State Bank and the private sector’s external debt.

It maintained that Rs3.54 trillion or 31% of the increase was due to currency depreciation, which was “a consequence of the misplaced exchange-rate, industrial, and trade policies of the previous government that led to large and unsustainable current account deficits and ultimately to sharp exchange rate adjustment.”

The ministry attributed around 27% of the increase or Rs3.13 trillion to cash balances and SBP’s foreign exchange liabilities. “It should not be interpreted as debt because it is an offset by cash balances of government and liquid assets of the SBP,” the statement read.

It further said Rs0.47 trillion or 4% of the increase was due to borrowing by public sector entities for spending on their financing needs.

Around 2% of the increase or Rs0.25 trillion was attributed to accounting adjustment due to difference in realised value and face value of long-term bonds issued and Rs0.18 trillion or 2% of the increase to borrowing by the private sector from external sources. which was “a healthy sign indicating private sector’s capacity to borrow from abroad for domestic investments”.

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The ministry also noted that Rs0.08 trillion or -1% of the increase had been retired on account of commodity operations, which was “a welcome development”.

“Rs4.11 trillion or 35% of the increase has been borrowed [by the government] for financing of the fiscal deficit,” it added.

The ministry said the finance division presented the debt policy statement and fiscal policy statement before the National Assembly every year to fulfil the requirements laid out under Section 6 and 7 of the Fiscal Responsibility and Debt Limitation Act 2005.

The finance ministry had informed the lower house of parliament that the per capita debt had jumped by 28% to Rs153,689 at the end of last fiscal year, while confessing that all the budget strategy targets were also missed that caused faster accumulation of public debt.

It also revealed that the current expenditures remained at 19-year high level in last fiscal year 2018-19. Compared to this, the development spending was the lowest in 11 years in terms of total size of the economy.