The Pakistan Muslim League-Nawaz (PML-N) government has pushed up the country’s debt burden by over one-tenth or about Rs1.8 trillion in its first year in office, taking the total to a historic high at Rs16.4 trillion and at the same time failing to restructure the Debt Management Office.
On average, the government borrowed Rs4.8 billion per day to run the affairs of the country as expenditures soared while tax revenues fell short of targets, showed data released by the State Bank of Pakistan.
It took power in June last year and the first year ended with the close of fiscal year 2013-14 in June.
Details revealed that debt obligations rose to Rs16.4 trillion at the end of June 2014, higher by Rs1.77 trillion or 12% compared to debts in June last year.
The borrowings violate the Fiscal Responsibility and Debt Limitation Act of 2005, which restricts government’s debt stock to below 60% of gross domestic product (GDP).
In June 2013, total public debt stood at 64.8% of GDP, which came down slightly to 64.4% in the wake of expansion of the economy to Rs25.4 trillion.
However, total debt and liabilities, including private-sector borrowings, surged to Rs18.23 trillion at the end of 2013-14, higher by Rs1.9 trillion or 11.6% from a year earlier.
The increase was noticed both in domestic and external debt besides a surge in borrowings by public sector enterprises (PSEs), indicating the government’s failure to turn around loss-making state-run enterprises.
By the end of June, domestic debt stood at Rs10.9 trillion compared to Rs9.5 trillion, an increase of Rs1.37 trillion or 14.5% over previous year.
External debt stood at Rs4.8 trillion, higher by Rs480 billion or 11.2% over previous year’s Rs4.3 trillion. The issuance of $2 billion worth of dollar-denominated Eurobonds alone added Rs198 billion to the external debt stock.
PSEs’ debt that stood at Rs312.2 billion at the beginning of the PML-N tenure rose to Rs366.2 billion in June this year, a rise of Rs54 billion or 17.3%.
The continuous mounting of PSEs’ debt burden showed that the government could not enforce reforms in the bleeding enterprises due to its inability to improve governance and administrative structures of these enterprises.
Outstanding debt payable to the International Monetary Fund (IMF) fell to Rs298.4 billion, a reduction of Rs136.4 billion or about one-third against the previous year.
The country consumed Rs1.8 trillion to retire and service the total debt stock, an amount which was 16.3% higher than previous year’s expenditures.
One of the reasons behind the ballooning debt was the government’s inability to have a better debt management strategy, said sources in the Ministry of Finance. In the last over one year, the government could not appoint a full-time director general of Debt Management Office.
For a significant period, the slot was allotted to a relatively junior officer. Lately, the additional charge of DG debt was given to the Ministry of Finance’s Additional Secretary Budget Dr Shujaat.
In the face of unsatisfactory debt management, the IMF has imposed a condition under its $6.7 billion Extended Fund Facility. According to the structural benchmark, the government will have to issue an administrative order to consolidate the responsibilities of public debt management in the Debt Management Office.
In April this year, Pakistan approved the IMF-devised new Medium-term Debt Strategy, but it had not been practically implemented due to administrative and governance weaknesses, said sources.
Published in The Express Tribune, August 21st, 2014.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS (32)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
1730360426-0/Menendez-Brothers-(2)1730360426-0-405x300.webp "article")
Bring down the Nawaz govt. let army chief become president and appoint Imran Khan as prime minister. That is the only way to come out of this crisis.
Where is my money?
@ishrat salim: Going default is not a good sign for the country like pakistan. Here there is political and social unreast. People asking for the civil disobidiance. If it would be decleared default slogans cannot coup with financial crisis. Using loose language and calling bad name are not the economic policies. An economic team has to sort out the best option for the solution.
@Farhan: Pakistan is a poor country because it has been looted by the likes of Nawaz Sharif, Zardari and all their corrupt politicians. Pakistan was on an excellent trajectory of economic, and social growth during Musharraf's time. According to the World Bank figures poverty was reduced by more than 10% (which is huge for Pakistan) and the economy grew by 7%-9% most of the years. Debt. and currency values stayed steady, and Pakistan was a favorite country attracting foreign investment (named in the Next 11 fastest growing economies after BRIC countries). So don't doubt Pakistan's potential for true development, if only we can rid ourselves of these corrupt and selfish politicians and have sincere and honest leaders for a sustained period.
@Muhammad Sohail Rafiq: Keep fooling yourself to believe in this NS govt. The fact is NS and company are showing their true colors and it is nothing different from their last govt that ended in 1999. Then too they had borrowed up to their eyeballs and left the country's economy in shambles. Why do they borrow so much? Simple. Borrow, start mega projects, and enjoy the $millions in kick-backs. How do you think they got so rich? They are on the same path now, except now we know and will throw them out once again before they completely destroy the country again.
For all those who are balking at this piece of news. Pakistan is a poor country. The choice is to either borrow or print currency just like Zardari did.
But hey, at least the constitution is safe. When there is even more load-shedding, maybe we can burn the constitution for light and warmth....for the all good it has done us, we might as well!
@Muhammad Sohail Rafiq:
Country going into default is not a crime. As recently as upto last year, Greece & Spain have defaulted on loans, but have they disappeared from the scene. It depends upon the govt art of negotiation to re-schedule same & then try to stick to the commitment.
NS & his party did not do their homework, hence, failed to comprehend the problem that their govt will face on being elected to power....this shows, that they were only interested to come to power by fooling the people than will tackle....dekhi gaigi attitude has brought this country to this mess. PML N was elected because the people got sick & tired of last govt, then passing of buck over to the last govt is not justified. what is the difference between PPP led govt & this govt, if the peoples problems are where it was. Except the rich have got richer & poor have been further pushed to poverty. They did not set their priorities in proper order, hence people are getting dis-enchanted. Metros etc.; are fine, but they should have focused on power to run factories / industries etc.; to provide for employment & will help us increase in export, , arrest rise in cost of food items & of daily use affordable to the poor. Provision of clean water, Health & Education. Agriculture income which constitute 21% to our GDP has been left out of focus. Collection of taxes & power bills should be made a priority . These are some of the venues which should have been prioritized in sequence so that the country could have been put on the right direction, other mega projects could supplement govt effort.
@Aschraful Makhlooq: Yes ! NS did break the beggin bowl,because it became too heavy with all the money received & spent it....
Pakistanis wake up or be ready for the DOOM. FUNNY how people are still backing nawz on the pretext of saving a sham democracy.
The Rs 1.8 Trillion is perhaps the most important reason for Nawaz Sharif to resign. Forget about murder, corruption, mismanagement & injustice!
So people still have doubt over NS being incompetent and destructive for Pakistan. The question should be asked where has all this money gone, as its clearly not been spent on Pakistani people.
Fruits of democracy :-)
I wonder how they call the country is on development path...Salam to Imran..plz save our country.
They are spoiling the economy but their so-called Finance Minister Ishaq Dar is showing wrong picture to the nation and I.M.F.
They are unable to run the country and its economy. The Prime Minister and their other Cabinet Ministers used to show wrong pic. All development projects are on long term basis which will take 8-10 years for completion. They are dreaming to complete five year terms so the people of Pakistan will be heavy burdened by their debt. During last month I have gone through one news in print media wherein Ishaq Dar informed that we have allowed commercial importers to import 200,000 Metric Tons Potato at Zero rates import duty. But the Government is unable to control the rising prices of Potato in the country. They are unable to fill up the patches because of high level of corruption in the country. All Government, Semi Government, Provincial Government even FBR is corrupt. All Governments always weep about the tax network. All Governments give target to the FBR to widen the tax network so that more public and businessmen can pay taxes.
If you are businessman running your small business and need to apply to NTN, Sales Tax you have to heavy kick back to the FBR people to get Sales Tax Registration. The people and business classes who are not paying taxes are enjoying their lavish lives. The tax payers are harassed by the concerned authorities.
Pakistan was at eadg of getting default when NS Govt. took the charge. There was a big circulating debt, corrupt government injured the public corporation, big trade deficit, and heavy mismanagment of the economy. New Govt. couldn't collect taxes to pay/service debts and budget deficit of bleeding corporations. To save the country fron getting default and to cure the public corporations borrowing was the most effective and quick source of finance. In addtion to problems some finance was also utilized to undertake developmental projects.
The report is not a complete failure. Govt. has taken some steps to reform the finacial managment i.e removal of subsidies from electricity, out sourcing of manay maga projects and planning to privatize public organizations.
These steps have been up surging the economy which can be seen from the IMF's reports and moody's ratings.
...and yet people support NS&Co.!! Maybe the people of this country still need to suffer more before they actually realise that they have been taken for a ride by these status quo parties. Hopefully, it is not too late by then.
A Chartered Accountant cant run Finance Ministry, simply a CA just like to maintain the Balance Sheet as having huge amount in balance. An economist should be Finance Minister who knows the proper usage of monetary.
Nawaz Shareef has been made PM through an orchestrated rigged elections to destroy pakistan.
........and where exactly has all this money gone ? .....certainly not to the people of Pakistan.
Let Sherief's rule for another 5 years .... we don't want democracy to derail but surely Pakistan will end up being derailed.
What a mess we are into because of these sham elections.
Its really Horrifying report. This Report makes me believe that IK's demands are Justifiable.
Wonderful governance and Dar's figure fudging. Keep it up Mian Sb!!
Is Nawaz Sharif fulfilling his commitments and promises he did with the nation that we shall break the begging bowl?Instead of breaking the begging bowl Nawaz Sharif has in his hands more bigger begging bowl than the PPP's regime.Imran Khan and Tahir-ul-Qadri are rightful on their stances that PML-N damaged and destructed Pakistan's economy and PML-N's government has to leave Pakistan at least now and hope that the next government shall make Pakistan a debt-free,economically prosperous,strong and sovereign country Insha Allah Almighty....
Support IK mission otherwise we are doomed to fail as a country. Shareefs et cmpany is getting richer and people are getting poorer with each passing day
Oh no. But we have to protect them because they are the guardians of the holy democracy. We cant speak up against them because that would be like speaking up against democracy.
That is why Islam banned 'sooud.' This debt burden is taking the country down while Nawaz Sharif is enjoying rides in the newly imported BMWs for him
Where is all the money going? Raises my anger!
It is mind boggling where goverment is burning that much money. There has to be critical review of how money being spent. I will particularily curious to find out about Nandipur project as it will lead to how money was misused at other places as well.
It is about time this PM has a critical review of its kitchen cabinet as it seems most of its ministers are simply incompetent - starting with Khawaja Asif, Abid Sher Ali and Ishaq Dar.
NS government borrows Rs1.8tr And yet IK is damaging the economy.