Pakistan’s debt is rocketing

ISLAMABAD: Pakistan’s debt burden is on a fast track alarming increase like never before and it is feared that if this trend is not checked, the debt figure may add up during five years of PTI government equal to the accumulated total borrowing of the last seventy years.Prime Minister Imran Khan has been referring to the figure of Rs30,000 billion debt which had reached this level in June 2018 from Rs6,691 billion in 2007. The prime minister is of the view that this phenomenal and alarming rise in debt from Rs6,691 billion in 2007 to Rs30,000 in June 2018 is the consequence of alleged corruption by the last PML-N and PPP governments, which ruled the country during this period.The State Bank of Pakistan’s recent figures, however, show the June Rs30,000 billion figure shooting up to Rs33,238 billion till Dec 2018. It means, in just six months, an increase of over Rs3,200 billion. And if this debt keeps on increasing with the same pace, five years later when the PTI government will be completing its tenure, there will be a total addition of at least Rs30,000 billion taking the total Rs60,000 billion debt.With the increase in the debt, burden on each Pakistani has increased by over Rs15,000 during the first six months of the current fiscal year. When the PML-N government left, debt burden on each Pakistani was around Rs13,8000 (till June 2018) which during the first half of the current financial year has crossed the figure of Rs15,3000.To be precise the total debt and liabilities figure in June 2018 was Rs29,892 billion. Six months later in December 2018, this figure has reached Rs33,238 billion figure which is a phenomenal rise.The State Bank figures relating to the total public debts and liabilities by end June 2013 were Rs16,228 billion. Each Pakistani till September 2013 was burdened with the debt and liabilities of Rs96,422. When the PML-N government left it reached Rs138,000 but now only in six months, it has flown to Rs15,3000.In early 2008 when country’s total debt and liabilities were Rs6,691 billion, each Pakistani was burdened with Rs37,172 debt. In a country in which according to official reports over 50 percent of the population faces food insecurity, this additional burden means more miseries for the future generations of Pakistan.Many believe that the Pakistani political leadership needs to sit together to meet the economic challenges badly hurting the country and its people. It is said that without any unanimous strategy, backed by all political parties, neither the poor people would get any relief nor would the country effectively face the economic challenges.Otherwise, it is said that the debt trap will continue hurting Pakistan more than before with every passing day. In 2015, The News broke a major scam of tax evasion involving hundreds of billions of rupees and whitening of black money worth trillions of rupees taking place every year with the government authorities facilitating the extremely undervalued sales and purchases of thousands of residential and commercial properties throughout the country every day.While Pakistan direly needs to broaden its tax base by making the rich to pay the tax, the federal and provincial authorities concerned were found graciously allowing the sale and purchase of properties, both commercial and residential, on extremely undervalued rates to the benefit of tax evaders.Minister of State for Finance Hammad Azhar when approached explained that the rise in the country’s debt during the first six months of the current fiscal year was due to the impact of devaluation of Pak rupee against dollar. He lamented that the PTI government had started off with the highest ever deficits whether trade deficit or current account deficit owing to which the government has to do the borrowing.Hammad explained that during the present fiscal year only, the government has to pay over Rs1,700 billion as interest. He said that the PTI government is taking different measures to check deficits and improve exports, remittances and revenues, which will help reduce borrowings.The state minister said that for a short term the over-all debt figures will increase but in the long term because of PTI government’s measures the rise will be effectively checked. When contacted Dr Khaqan Najeeb, Adviser and Spokesman for Ministry of Finance gave The News the following version:"The actual borrowing by the government for financing of fiscal deficit was Rs1,030 billion during July-December 2018. Rest of increase in public debt stock was due to depreciation of Pak rupee against US dollar as well as increase in government balances with the banking system. It is worth noting that depreciation of Pak rupee increases the rupee value of external debt (reporting loss), but does not add much to foreign currency liability of the country during any particular fiscal year;- Importantly, external public debt only recorded an increase of $1.2 billion during first six months of current fiscal year against the increase of $4.4 billion recorded during the same period last year;- Over the medium term, the path of projected public debt to GDP ratio is on downward trajectory (from 72.5 percent at end June 2018) supported by fiscal consolidation through enhanced revenue mobilization and rationalisation of current expenditure;- The market has started reacting favorably after changes in interest rate environment which has encouraged market participants to deploy funds towards medium to long-term government instruments as evident from increased participation in last two auctions of Pakistan investments bonds. This momentum is expected to continue in future which would help improving the sustainability of public debt portfolio."Meanwhile some recent media reports disclosed that the government made a hefty borrowing of Rs2.57 trillion from the State Bank of Pakistan (SBP) in January 2019.

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