The government on Friday sought National Assembly's authorisation to borrow Rs26.3 trillion in the next fiscal year to repay and service loans, which was 81% higher compared to the original demand in the outgoing year and indicated indebtedness of the country.
The amount of five demands worth Rs26.3 trillion is more than the total size of federal budget 2021-22, which is Rs8.5 trillion. The difference exists because the government does not book loans, taken for repayment of domestic and foreign debt, in the budget. These transactions are settled outside the budget.
The demand for Rs26.3 trillion for repayment of principal loans and debt servicing is higher by Rs11.7 trillion or 81% against the outgoing fiscal year's requirement under these heads, according to documents.
Finance Secretary Yousaf Khan was not available for comments.
The demands were placed the day the Economic Affairs Division disclosed that Pakistan obtained $11.9 billion in gross loans during the first 11 months of current fiscal year - on average $1.1 billion a month. This includes $3.7 billion in short-term foreign commercial loans that are expensive.
Finance Minister Shaukat Tarin placed total demands for Rs26.5 trillion before the National Assembly under the head of charged expenditures. The authorisation of roughly another Rs300 billion has been sought to meet obligatory expenditures of the National Assembly, Senate, Election Commission of Pakistan, Supreme Court of Pakistan, President of Pakistan, Islamabad High Court, federal and tax ombudsmen and Foreign Office.
The Rs26.5 trillion worth of borrowing is the charged expenditure under the constitution and the National Assembly does not have the right to veto these expenditures. The role of the lower house of parliament is limited to authorisation only.
Except for Rs3.06 trillion cost of interest on debt that will be part of the federal budget, the rest of the amount will not be booked in the budget and will be directly borrowed from domestic and foreign markets to repay loans obtained in the past by previous and current governments.
Interest payments on domestic and foreign loans will consume roughly 36% of the proposed Rs8.5 trillion budget for the next fiscal year.
Against the original borrowing plan of Rs10.1 trillion for the outgoing fiscal year, the government sought National Assembly's approval for Rs21.6 trillion for the repayment of maturing domestic debt in the next fiscal year. The amount is 113% or Rs11.5 trillion higher than the outgoing fiscal year.
It suggests that the loans obtained through the treasury bills and Pakistan Investment Bonds are maturing this year, which the government will refinance instead of paying off.
Prime Minister Imran Khan vowed that one of the benchmarks of his success in the government would be the reduction in total debt and liabilities to Rs20 trillion from Rs30 trillion left behind by the Pakistan Muslim League-Nawaz (PML-N) government. However, the Rs30 trillion debt pile has already inflated to Rs45 trillion.
The government has also placed another demand for Rs2.8 trillion for domestic debt servicing, which is 4.8% or Rs127 billion higher than the outgoing fiscal year.
To repay foreign loans, the government has sought Rs1.43 trillion for the new fiscal year, which will be obtained from foreign lenders. The requirement for foreign loan repayment is up by 16% or Rs199 billion.
The government has sought another Rs302 billion to pay interest on foreign loans, which is lower by Rs13 billion due to the rollover of G20 debt.
The government has placed a demand for Rs74.4 billion before the National Assembly to repay short-term foreign loans, which is down by 59% or Rs109 billion.
By the end of current fiscal year, the public debt-to-GDP ratio is estimated to fall to 83%, which is better than the previous fiscal year. But the government is legally bound to limit the debt to below 60% of GDP and every successive government has breached this statutory limit.
Other charged expenditures
For the staff, household and allowances of the president, the government has placed a demand for Rs1.02 billion before the National Assembly, which is 2.8% higher than the outgoing fiscal year.
Both the National Assembly and Senate will get an increase in their allocations over the original budget for this year. The government has placed a demand for Rs2.4 billion for the National Assembly, up by Rs140 million or 6%. The Senate will get Rs2.2 billion, higher by Rs199 million or 10%.
The government has sought Rs2.8 billion for charged expenditures of the Supreme Court, which is higher by Rs400 million or 17%.
For charged expenditures of the Islamabad High Court, a demand for Rs1.1 billion has been placed before the National Assembly, higher by Rs386 million or 55%. The Election Commission of Pakistan will get Rs3.8 billion, an increase of 3.3% over this year.
Published in The Express Tribune, June 26th, 2021.
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