ISLAMABAD: The government may miss its medium-term debt reduction targets due to current high public debt levels amid addition of $14 billion to the external public debt in the current fiscal year.
Debt Office of Finance Division Director General Abdul Rehman Warraich shared details after parliament asked the government to explain its five-year debt management plan, projected strategic targets of debt maturity and diversification.
“We may not be able to meet all the medium-term debt strategy targets due to current high debt levels but we will make significant progress towards achieving these goals,” Rehman told the Senate committee.
Headed by former finance minister Asad Umar, the National Assembly Standing Committee on Finance took a briefing on the government’s debt management strategy.
Rehman informed the committee that the government would borrow almost $22 billion from external sources by end June 2020, which will increase total external public debt to around $98 billion.
Total public debt stood at 80.4% of GDP by the end of June 2019, which the government wants to cut to 66.5% by 2024. The share of domestic debt in the total public debt was 66%, which the government seeks to slash to 59% in five years.
However, Rehman said these targets might be unachievable due to rising financing needs. This ratio, he said, is going to be worse over the next five years. The external debt is going to be 41pc by the end of FY24 and domestic debt to be 59pc, he added. The change in these ratios depends on the economy’s performance.
The DG said the external debt portfolio was “pretty in line with the target but the government wants to reduce its reliance on commercial bank loans”. The share of commercial bank loans in the total external public debt was 18%, which the government wants to reduce to 12% in five years.
“We believe that over the longer run the external debt should not be more than 30% but considering the huge external financing needs, the external debt ratio is going to worsen a little bit,” said the DG Debt Office.
