Senate committee concerned over growing external, domestic debt

External debt increased by $3.80 billion in 2016-17: MoF

ISLAMABAD: Showing its serious concerns over the growing volume of external and domestic debt, Senate Standing Committee on Finance, termed debt alarming since there is no strategy of returning the debt. The committee which met on Wednesday with its chairman Senator Saleem Mandviwala in the chair has asked the Ministry of Finance to present a way forward strategy for repayment of huge loans.

Mandviwala claimed that the debt figure was very alarming. “Despite the grave situation the government continues taking more loans from local and foreign sources,” he said.

When asked about whether there was a strategy for returning the foreign and local debt, Secretary Finance Shahid Mahmood tried to give a diplomatic answerer saying that the main source of inflow for Pakistan was tax collections by the FBR and key foreign source was workers’ remittances.

The committee was discussing the debt position in the country up to May2017 which stood at $58 billion for foreign loans, whereas the domestic debt was Rs12, 956 billion (Rs12.95 trillion), with an increase of Rs1.18 trillion over previous fiscal year – 2015-16.

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The officials of Secretary Finance said that external debt last year in 2015-16 was $57 billion and there has been an increase of $3.8 billion in the previous fiscal year 2016-17 (up to May). Regarding rate of interest over various loans especially those obtained from China, the Committee was requested for an in-camera briefing as rate of interest was a confidential matter.

However, Senator Mohsin Aziz of PTI said that total debt has increased by around 19 -20 percent in one year and he pointed out that 57 +3.8 is 60.8 and not 58, but the officials said that the amount has reduced because many loans were in other currencies like Yen, Pound Sterling etc and their value against the dollar has dropped.

The Committee members pointed out that it was a cosmetic affect as these currencies could become strong again and the loan would rise.

The Committee also expressed concerns over high domestic debt and the members said that due to excessive government borrowings the commercial banks in country were less interested to lend to private sectors.

The Committee directed Finance Ministry to prepare a paper highlighting options for the repayment of debt, as depending on FBR collection only was not a viable option.

Senator Mohsin Leghari pointed out that FBR was not only holding huge amount of returns only to maintain books but also seeking advance tax from all sectors to meet their targets.

Meanwhile, even the officials of FBR acknowledged that clearing the refunds of business community was essential to maintain the circle of sales tax as well as to enforce value added tax.

Khawaja Tanvir, member IR Operations informed the Committee that FBR was in the process of matching and reconciling the tax refund figures with the business community and assured the Senators that refunds would be settled in near future

Earlier talking about the declining remittances especially from the Middle Eastern countries, Senator Ilyas Bilour of the ANP said that the remittances have declined this year mainly due to flawed foreign policy of the government.

“We usually bow down to Saudi’s demands. Riyadh asked for Raheel Sharif we agreed, the Arab country asked for hunting we agreed but when it comes to bringing in workers the foreign country gives chances to Indians. Where are our decision makers?,” he asked secretary finance who claimed that remittances have declined in the whole region from Middle East because of low oil prices and from UK due to Brexit.

But this did not convince the members of the Committee and the Senators said that the ministry should also see the export and home remittance figures of Bangladesh too. Mohsin Aziz said that Bangladeshi Taka was stronger than Pakistani Rupee, not only their remittances were higher but their exports had topped $40 billion.

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Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]
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