ISLAMABAD: Unlike the impression that the Pakistan Tehreek-e-Insaf (PTI)-led government has taken the country’s public debt to exorbitant levels during its first two years in power, the Ministry of Finance claims that public debt management indicators had, in fact, improved significantly during the second year of the incumbent government.
Taking to Profit, Finance Division spokesperson Mohsin Chandna stated that the average time of maturity of the total domestic government securities increased from 1.5 years to 2.7 years in the last two years.
Similarly, he added, the proportion of domestic government securities reduced, as the share of debt maturing within one year lowered from 71pc of the total domestic debt to 51pc.
The spokesperson said the difference between policy rate and cost of borrowing ten-year fixed-rate bonds was 4.1pc on June 30, 2018, which during the last two fiscal years came down to 1.2pc. However, the indicator of the central bank borrowing, as a percentage of total domestic debt, deteriorated from 28pc in 2018 to 38pc in June 2020.
“This was 48pc in the first year of the PTI government but was reduced to 38pc in the second year,” said Chandna.
He informed that the proportion of fixed-rate government securities also lowered to 38pc from 29pc in June 2018.
The spokesperson said that the previous government issued more than Rs250 billion worth of bonds in the domestic market at excessive rates, whereas the PTI government had issued long-term bonds on lower interest rates.
“We have issued Rs38 billion Sukuk bonds in the domestic market for periods of three to 20 years. A sum of Rs16 billion has been issued on 8.1pc interest rate, Rs12 billion on 9.91pc interest rate and Rs10 billion on 10.42pc interest rate. The government will issue bonds worth Rs140 billion in the domestic market in the upcoming months,” he said.
Chandna said that Pakistan’s debt-to-GDP ratio has increased to 87pc in the last two years, from 72.1pc in 2018, due to the borrowing of Rs11.3 trillion. “The reasons for this increase are primary balance, interest expenses, exchange rate depreciation and IMF loans, cash balances and effects of accounting policies.”