Public debt up by Rs12.5tr in 30 months

Minister tells NA domestic, external debt contributed Rs7.9tr, Rs4.6tr respectively

ISLAMABAD:

Finance and Revenue Minister Hammad Azhar on Saturday told the National Assembly that the country’s public debt had increased by Rs12.5 trillion in 30 months -- between June 2018 and December 2020.

“Of [this amount], domestic and external debt contributed Rs7.9 trillion and Rs4.6 trillion, respectively,” he added in his written reply to a lawmaker's query.

The minister added that the current government had to pay Rs6.2 trillion, or 50% of the increase, as interest on debts borrowed predominantly by the previous governments.

Hammad pointed out that public debt had increased by Rs3 trillion, or 24% of the increase, due to currency devaluation.

Read more: Pakistan eyes another $1b debt relief from G-20

“This increase was not due to borrowing but due to revaluation of external debt stock in terms of rupees after currency devaluation,” he clarified.

A sum of Rs2.4 trillion, or 19% of the increase, was borrowed for financing of primary deficit, apart from Rs0.6 trillion, or 5% of the increase, on account of increased cash balances of the government to meet emergency requirements.

“This increase in debt was offset by corresponding increase in the government’s liquid cash balances,” the minister added.

“A total of Rs0.3 trillion, or around 2% of the increase, was due to difference between the face value and the realised value of government bonds issued during this period,” Hammad noted.

In response to another query, the minister said the total interest payment of Rs6.2 trillion, an amount of around Rs1.3 trillion had been paid towards new loans obtained, mainly to pay interest on the past loans, by the current government.

The global debt payments suspension initiative has provided a temporary relief of around $3.5 billion to Pakistan and one-third of the relief has come from China, reducing immediate borrowing requirements by the same amount.

Under the third-phase (July-December 2021) of the Debt Service Suspension Initiative (DSSI) by the G-20 countries, Pakistan will get around $1 billion relief, the economic affairs ministry said on Friday. This includes $785 million worth of pause on principal loan repayments and the remaining on account of interest repayments.

An International Monetary Fund (IMF) staff report has put the relief amount under first two phases at $2.5 billion. This has brought the total temporary relief to $3.5 billion under three phases.