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.
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