Islamabad: Ex-Finance Minister Dr Salman Shah criticized the government for its dependence on expensive foreign borrowings and stated debt equity and repayment would be a huge problem for the next government, reported a local newspaper.
Shah said if these foreign loans had been obtained at higher interest rates and shorter amortization period for infrastructural projects which would have given returns in double digits, then it wouldn’t have been a problem.
He added that debt servicing would be very high as international donor agencies like the World Bank have enforced strict policies and is only providing project loans.
While talking about the bonds floated during Musharraf’s regime, Shah said those loans had been obtained for debt repayment and to create space for the government. He said the loans obtained were at lesser interest rates in comparison to other B+ rating countries.
Shah cautioned that the debt to GDP ratio will increase but it is not something to panic about. He said the government needed to increase exports by supporting the textile industry, which in his opinion was very competitive.
The increase in external debt during the PML-N led government regime was worrying, said renowned economist Dr Shahid Hassan Siddiqui. Siddiqui said there had been a decrease of $4.6b in State Bank of Pakistan’s forex reserves since October 2016.
He voiced concern over the government’s inability to pay back foreign loans, and loans obtained were being utilized to bridge the current account and trade deficits.