Pakistan’s net public debt has crossed PKR 18.28 trillion, rising about 35% during the tenure of the current governing Pakistan Muslim League Nawaz (PML-N).
The finance ministry has sought clarifications by claiming that the public debt was mainly obtained to finance the fiscal deficit and was approved by the parliament. Some of the financing had to be done in the form of external loans, to supplement the domestic resources required to boost economic development and developing the country’s infrastructural base.
“These loans were obtained for financing of projects of national importance, budgetary and balance of payments support, earthquake and floods, rehabilitation assistance and import of urea and crude oil,” the ministry said.
The ministry clarified that local debt was unceasing and for the most part, had to be renegotiated on a yearly basis, while the majority of the external loans contracted by the current government were ‘economical’ and were financed by long-term funding, which would be used to retire the corresponding amount of expensive domestic loans. External credits are reimbursed through budgetary designations in light of the remuneration calendar of each and every loan.
In its response, to the rise in debt over the past three years, the ministry claimed that it had been able to considerably reduce financial liabilities and had employed various growth supporting structural reforms. This had brought about development in the country’s debt refund ability and had allowed it to switch expenses. However, another driving reason behind these loans was to build external buffers to protect against exchange rate volatility and to absorb external shocks.
Along with that, economic growth was expected to continue its exponential upward trend. The ministry explained that development projects linked to the CPEC in the areas of energy and infrastructure were also anticipated to add an extra two percent points to GDP growth in the upcoming years.
Additionally, the ministry claimed that notwithstanding refunds by the current government of foreign loans worth over $12bn that were acquired by the previous governments, foreign exchange reserves currently stood at over $23bn, up from the $11bn mark at the end of June 2013.The government also stated that it has effectively brought down the financial deficit from 8.2% of the GDP in 2012-13 to 4.6pc in 2015-16, with a target to further restrict the budget deficit at 3.8pc of GDP at the end of the current fiscal year, and restrict it to 3.5pc by FY 2018-19.
