The government on Monday sought the National Assembly’s seal of approval for borrowing Rs27.5 trillion to repay the maturing debt and bear the interest cost as the country’s external debt repayment requirements increase sharply due to currency devaluation and growing reliance on foreign creditors.
The Ministry of Finance tabled the list of expenditures in the National Assembly amounting to Rs27.9 trillion, including expenses of Rs440 billion on subjects other than the debt, for fiscal year 2022-23, starting Friday. The government of Pakistan does not repay the principal loans out of its budget and contracts more debt to repay the maturing ones. This is also a reason why the debt-related expenditures are almost three times the size of next fiscal year’s budget.
The amount of Rs27.5 trillion sought for the repayment of principal loans and debt servicing is higher by Rs1.1 trillion over the outgoing fiscal year’s original budget approved for such expenses in June last year, according to the documents.
Finance Minister Miftah Ismail placed the total demand for Rs27.9 trillion before the National Assembly for “charged expenditures”. Another roughly Rs440 billion has been sought to meet the obligatory expenditures of the National Assembly, Senate, Election Commission of Pakistan, Supreme Court of Pakistan, President of Pakistan, Islamabad High Court, Federal Tax Ombudsman and Foreign Office.
The Rs27.9 trillion borrowing is called “charged expenditures” under the Constitution and the National Assembly does not have the right to veto these expenditures. The lower house of parliament’s role is limited to only authorisation.
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Except for the Rs3.950 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 the domestic and foreign markets to repay the loans obtained in the past by the previous governments.
Interest payments on domestic and foreign loans will consume roughly 42% of the proposed budget of Rs9.6 trillion for the next fiscal year.
As against the original Rs21.6 trillion borrowing plan for the outgoing fiscal year, the government sought the National Assembly’s approval for Rs19.7 trillion for the repayment of maturing domestic debt in the next fiscal year.
The amount is nearly 9%, or Rs1.9 trillion, less than the outgoing fiscal year.
The previous government of Pakistan Tehreek-e-Insaf (PTI) added nearly Rs19.5 trillion to the public debt during its almost 43 months in power.
Former prime minister Imran Khan had vowed that one of the benchmarks of his success in the government would be the reduction in total debt and liabilities to Rs20 trillion but he failed to live up to his core promise.
The government has also placed another demand for Rs3.44 trillion for domestic debt servicing, which is 22.5%, or Rs600 billion, higher than the outgoing fiscal year.
The jump in the key interest rate is a major cause behind the surge in the debt servicing cost in addition to the ballooning budget deficit.
To repay foreign loans, the government has sought a record Rs3.8 trillion for the new fiscal year, which will be obtained from foreign lenders.
The requirement for the foreign loan repayment is up by 165%, or Rs2.4 trillion. A key reason for the surge in foreign debt repayment is the currency devaluation as now almost 50% more rupee is required for paying the same amount of dollarbased debt.
The government has sought another Rs511 billion to pay interest on foreign loans, which is higher by Rs209 billion, or 69%.
G-20 countries have frozen Pakistan’s debt repayment in the aftermath of the coronavirus pandemic that also kept the debt servicing cost on the lower side in the past couple of years.
Pakistan on Monday signed the Debt Service Suspension Agreement with France for a loan of $107 million under the G-20 debt relief initiative. This amount, initially repayable between July and December 2021, will now be repaid over a period of six years.
The total amount of debt that has been suspended under the Debt Service Suspension Initiative (DSSI), covering the period from May 2020 to December 2021, stands at $3.7 billion, according to the Ministry of Economic Affairs.
The government has also placed a demand for Rs143 billion before the National Assembly to repay shortterm foreign loans, which is up by 92%, or Rs68 billion.
Other charged expenditures For the staff, household and allowances of the president, the government has placed a demand for Rs1.05 billion before the National Assembly, which is 3.5% higher than the outgoing fiscal year.
Both the National Assembly and Senate will get an increase in their allocations over the original budget for the current year. The government has placed a demand for Rs2.7 billion for the National Assembly, up by Rs300 million, or 12.5%. The Senate will get Rs2.4 billion, higher by Rs200 million, or 9%.
The government has sought Rs3.1 billion for charged expenditures of the Supreme Court, which is higher by Rs300 million, or 10.7%.
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