ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government has added Rs11.610 trillion in debt in the first 15 months of its government, taking the overall debt of the country to Rs34.241 trillion, revealed the Debt Policy Statement 2019 issued by the Ministry of Finance on Friday.
The report states that the total public debt reached Rs 34.241 trillion at the end of September 2019 registering an increase of Rs1.533 trillion during the first quarter of the current fiscal year. The increase in public debt was 11.610 trillion from July 2018 to September 2019 as the government debt was Rs24.953 trillion in June 2018.
The domestic debt registered an increase of Rs1.918 trillion during the first quarter of FY2019-20 while government borrowing for the financing of federal fiscal deficit from domestic sources was only Rs308 billion during the same period. The report further states that the rest of the increase in domestic debt was on account of an increase in cash balances of the government by around Rs1.610 trillion.
In the wake of government commitment to zero borrowings from the State Bank of Pakistan (SBP), a cash buffer is being maintained to meet short term liquidity needs of the government.
In addition to this, the report states that lower revenue collection and a sharp rise in current expenditures caused deterioration in fiscal indicators during FY2018-19, leading to the government registering a primary deficit of 3.4 per cent of GDP and an overall deficit of 8.9 per cent of GDP. Similarly, revenue deficit also witnessed a significant increase and was recorded at 5.6 per cent of GDP.
The fiscal performance during FY2018-19 can be mainly assessed through analysis of developments in revenue and current expenditure as revenue collection at the federal level remained lower than 2 per cent of GDP than expected during FY 2018-19, out of which around 3 to 4 per cent of the revenue shortfall was due to one-off factors which are not expected to carry over into FY2019-20.
The report also mentioned that delay in renewing telecom licences, delay in the sale of envisaged state assets and weaker than anticipated tax amnesty proceeds contributed around 1 per cent of GDP while a shortfall in the transfer of SBP profits contributed an additional 0.5 per cent of GDP.
Furthermore, the report states that the current expenditure grew by around 21 percent during FY 2018-19 mainly due to higher interest payments (up by 39 per cent) on account of rise in domestic interest rates.
The government initially budgeted the interest servicing target that was only 6 per cent over FY2017-18, however, overall interest payments were 29 per cent higher compared to expense targeted in the 2018-19 budget.
The report revealed that total public debt as a percentage of GDP stood at 84.8 per cent while the total debt of the government recorded at 76.6 per cent of GDP at the end of June 2019. Total public debt to GDP ratio was 72.1 per cent at the end of June 2018, well above the threshold of 60 per cent as specified in the Fiscal Responsibility and Debt Limitation Act.
SERVICING OF PUBLIC DEBT:
During FY2018-19, public debt servicing was recorded at Rs3.065 trillion against the annual budgeted estimate of Rs2.396 trillion. Total debt servicing increased by around 57 per cent during FY2018-19 compared with last fiscal year which was driven by higher domestic interest payments (on account of rising domestic interest rates) while external debt repayments increased significantly and recorded at Rs974 billion during FY2018 -19 compared with Rs450 billion during the last fiscal year. Interest servicing grew by around 39 per cent during FY2018-19 compared with last fiscal year mainly due to increased borrowing on account of higher than the budgeted fiscal deficit, increase in domestic interest rates as well as the depreciation of the rupee against main international currencies also contributed towards this rise.
Domestic debt stock was recorded at Rs20.732 trillion at the end of June 2019, registering an increase of Rs4.315 trillion during FY2018-19. The report revealed that the refinancing risk of the government greatly reduced as domestic debt maturing within year reduced to 37 per cent at the end of June 2019 compared with 66 per cent at the end of June 2018.
The report mentioned that External Debt and Liabilities were recorded at $106.3 billion by the end of June 2019, registering an increase of $11.1 billion compared to an increase of $11.8 billion recorded a year earlier.
One half of the increase in EDL was due to a 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 a balance of payment support, add to foreign currency reserves and do not come as an extra resource in the budget.
External public debt increased by $3.2 billion during FY2018-19 compared with the increase of $7.7 billion during FY2017-18. Sizeable repayment ($7.4 billion) reduced the pace of external public debt accumulation during FY2018-19 in addition to this, PSEs external debt also increased by $1.3 billion mainly driven by development loans obtained by concerned PSEs and private sector loans recorded an increase of $1.2 billion.