Govt rebuffs media report, says net addition to public debt in FY19 was lowest in last three years

The Economic Affair Division has strongly rebuffed a media report titled ‘Govt added $10.814 billion to public debt’ during FY19, saying that the figure quoted in the story is factually incorrect and misleading.

“Economic Affairs Division would like to clarify that the number for external public debt (i.e. $10.814 billion) is factually incorrect. The net addition to the external public debt during the outgoing fiscal year was $2.29 billion and not $10.814 billion,” a statement issued by the division read.

The story also highlighted that the government is procuring expensive short-term commercial loans without the approval of competent fora, it noted.

“The total external inflows during FY2018-19 were $10.186 million, including grants worth $330 million. The external loans obtained by the government during the year were $9.85 billion while the government made payment of $8.94 billion on account of retirement of external debt and debt servicing. Therefore, the net addition to the external public debt was only $2.29 billion which is the lowest in the last three years. Net additions to the external public debt during the last three fiscal years (i.e. FY16 to FY18) were $6.82 billion, $4.77 billion and $8.64 billion respectively.

“The disbursement comparison of Asian Development Bank and World Bank made in the story is also incorrect. The factual position is that ADB and World Bank disbursed $ 541.17 million and $ 652.75 million respectively during FY19 as compared to $ 945.69 million and $ 817.54 million during FY18.”

As per the statement, a slowdown in disbursement from development partners during the outgoing fiscal year was mainly due to a period of political transition in the country. During the interim government’s period, there was a complete ban by Election Commission of Pakistan on new development projects and relevant competent forums i.e. ECNEC and CDWP were not in place for quite some time, it added.

“After the formation of the elected government, the provincial governments’ annual development plans were approved at a very delayed stage. Consequently, approval of new lending operations and project-related disbursement were slow during the initial months and started to pick-up during the second half of the year.

“It is important to note that the budgetary support was also not available due to a weak macroeconomic position inherited by the present government.

Going forward, the division stated, the government is working on a strategy whereby procurement of long term concessional financing from multilateral and bilateral sources is a priority.

“With the restoration of confidence of international financial institutions and good prospects of budgetary support, the government is expecting very strong inflows from its development partners this year. Acquiring commercial financing is not a priority; the government resorts to commercial borrowing only as a contingency measure to strengthen foreign exchange reserves and to maintain stability in the market.

“These commercial finances are acquired after full due diligence, at the best possible rates and have the approval of a competent forum which in this case is the Federal Cabinet,” it concluded.