Debt, liabilities in Pakistan soar by Rs116 trillion in 15 months

The Pakistan Tehreek-e-Insaf (PTI) government has added Rs11.610 trillion in debt in the first 15 months of its government.

PTI government took the overall debt of the country to Rs34.241 trillion, revealed the Debt Policy Statement 2019 issued by the Ministry of Finance.

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 borrowed 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.