Finance Minister Ishaq Dar announced a new strategy for debt in his speech. According to Dar, a Medium Term Debt Management Strategy (2014-18) has been developed to reduce the refinancing risk, increase the maturity profile along with an increase in provision of external inflows to reduce pressure on domestic resources and allow private sector to get more bank loans.
According to Dar, programme loans received during the fiscal year 2013-14 from development partners as well as finances raised through Euro Bonds will assist in lengthening of maturity profile of public debt.
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In 2014-15, the government has budgeted a total of Rs1.325 trillion for debt servicing in the Finance Bill – which is up from the Rs1,194 billion revised budget of 2013-14 (which is higher than the originally budgeted Rs1,151 billion).
The budget allocated to debt servicing for the domestic debt for the year 2014-15 is Rs1,224,592 million – a steep increase of approximately Rs100,000 million from the budget allocated in 2013-14 which was Rs1,108,753.
The budget allocated to debt servicing for the foreign debt for the year 2014-15 is Rs100,640 million as opposed to the budget allocated in 2013-14 which was Rs78,516 million. The difference viewed is at least Rs30 million.
But the silver lining seems to be that debt as a percentage of GDP is going down and projections by the government seem to suggest a continued downward trend over the next few years. In 2014-15, the government has put the public debt to GDP ratio at 56.7% - but that’s lower than the 60.2% figure for 2013-14.
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