Public debt sustainable, govt’s capacity to repay remains adequate, says MoF

SBP’s figures from June 2020 report country’s debt-to-GDP ratio at 87.2pc

ISLAMABAD: The Ministry of Finance (MoF) on Saturday said that Pakistan’s public debt is at a sustainable level and the country’s capacity to repay it remains adequate.

According to the latest date released by State Bank of Pakistan (SBP) the country’s total public debt-to-Gross Domestic Product (GDP) ratio has increased from 86.1 per cent in June 2019 to 87.2 per cent in June 2020. The same ratio had gone down to around 84 per cent in December 2019 due to a strong growth in Federal Board of Revenue’s (FBR) tax collection and strict control on current expenditure.

According to the MoF, the government was able to post a primary surplus in February 2020 after a gap of many years due to its prudent policies.

However, post February 2020, Pakistan’s economy was hit by a Covid-19 induced economic slowdown which led to reduction in revenues, increase in expenditures, decline in domestic and global demand, lower tourism and business travel and disruption of supply, trade and production linkages.

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The MoF said that Pakistan’s debt-to-GDP ratio has increased due to a sharp decline in growth and an increase in the budget deficit primarily due to Covid-19 related expenditures, during the last four months of FY20.

However, it added that the government will be able to bring the debt-to-GDP ratio on a downward path over the medium term by increasing revenues and maintaining fiscal discipline.

According to the Global Economic Prospects report published by the World Bank in June 2020, Pakistan’s economy has fared better than its other South Asian economies during the coronavirus pandemic.

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