ISLAMABAD: The Prime Minister Imran Khan-led government of Pakistan Tehreek-e-Insaf (PTI) has added Rs 11610 billion in debt in 15 months of its government, reaching the overall debt on country to Rs34241 billion,the Ministry of Finance said in the debt policy statement 2019 on Friday.
The finance ministry report states that total public debt reached Rs 34,241 billion at end of September 2019 registering an increase of Rs1,533 billion during first quarter of current fiscal year. The increase in public debt was Rs 11610 billion from July 2018 to September 2019 as government debt was Rs24953 billion in June 2018.
The Domestic debt registered an increase of Rs1,918 billion during first quarter of FY 2019-20 while government borrowing for the financing of federal fiscal deficit from domestic sources was only Rs308 billion during the said period. The report further stated that the rest of the increase in domestic debt was on account of increase in cash balances of the government by around Rs1,610 billion.
READ MORE: PTI govt misses IMF target, adds Rs565b to circular debt
In the wake of government commitment to zero borrowing from SBP, a cash buffer is being maintained to meet short term liquidity needs of the government, the statement added. In addition to this, the report stated that lower revenue collection and a sharp rise in current expenditures caused a deterioration in fiscal indicators during Fiscal Year (FY) 2018-19 such as the government registered a primary deficit of 3.4 percent of Gross Domestic Product (GDP) and an overall deficit of 8.9 percent of GDP. Similarly, revenue deficit also witnessed significant increase and recorded at 5.6 percent of GDP.
The fiscal performance during FY 2018-19 can be mainly assessed through analysis of developments in revenue and current expenditure as revenue collection at the federal level remained lower than two percent of GDP than expected during FY 2018-19, out of which around three to four percent of the revenue shortfall was due to one-off factors which are not expected to carry over into FY 2019-20.
The report also mentioned that delay in renewing telecom licenses, delay in sale of envisaged state assets and weaker than anticipated tax amnesty proceeds contributed around one percent of GDP while a shortfall in the transfer of SBP profits contributed an additional 0.5 percent of GDP.
Furthermore , the finance ministry stated that the current expenditure grew by around 21 percent during FY 2018-19 mainly due to higher interest payments (up by 39 percent) on account of rise in domestic interest rates.
The government initially budgeted the interest servicing target that was only six percent over FY 2017-18, however,overall interest payments were 29 percent higher compared to expense targeted in the budget 2018-19.
The report revealed that total public debt as percentage of GDP stood at 84.8 percent while total debt of the government recorded at 76.6 percent of GDP at June end of 2019. Total public debt to GDP ratio was 72.1 percent at end June 2018, well above the threshold of 60 percent as specified in Fiscal Responsibility and Debt Limitation Act.
Servicing of Public Debt
During FY2018-19, public debt servicing was recorded at Rs3,065 billion against the annual budgeted estimate of Rs2,396 billion. Total debt servicing increased by around 57 percent during FY 2018-19 compared with the last fiscal year which was driven by higher domestic interest payments (on account of rise in domestic interest rates) while external debt repayments increased significantly and recorded at Rs 974 billion during FY 2018 -19 compared with Rs 450 billion during last fiscal year. The interest servicing grew by around 39 percent during FY 2018-19 compared with last fiscal year mainly due to increased borrowing on account of higher than budgeted fiscal deficit, increase in domestic interest rates as well as depreciation of Pak Rupee against main international currencies also contributed towards this rise.
Domestic debt
Domestic debt stock was recorded at Rs 20,732 billion at end June2019, registering an increase of Rs 4,315 billion during FY 2018-19. The report revealed that the refinancing risk of the government greatly reduced as domestic debt maturing within a year reduced to 37 percent at end June 2019 compared with 66 percent at end June 2018.
The report mentioned that External Debt and Liabilities (EDL) was recorded at US$ 106.3 billion by end June 2019, registering an increase of US$ 11.1 billion compared to an increase of US$ 11.8 billion recorded a year earlier.
One half of the increase in EDL was due to rise in SBP liabilities in the form of deposits placed by bilateral partners (Saudi Arabia, UAE, Qatar). It is important to note that these deposits only provide balance of payments support, add to foreign currency reserves and do not come as an extra resource in the budget.
External public debt increased by US$ 3.2 billion during FY 2018-19 compared with the increase of US$ 7.7 billion during FY 2017-18. Sizeable repayment (US$ 7.4 billion) reduced the pace of external public debt accumulation during FY 2018-19 in addition to this,Public Sector Enterprises (PSEs) external debt also increased by US$ 1.3 billion mainly driven by development loans obtained by concerned PSEs and Private sector loans recorded an increase of US$ 1.2 billion.
