ISLAMABAD: Pakistan’s net public debt has crossed the Rs18.28 trillion mark, rising about 35pc during the tenure of the ruling Pakistan Muslim League-Nawaz (PML-N).

This was reported by the ministry of finance, in response to a question from Pakistan Peoples Party (PPP) MNA Shahida Reh­mani in the National Assembly last week. “The volume of net public debt as on Sept 30, 2016 was Rs18,277.6 billion,” the ministry’s response said.

Total public debt stood at Rs13.48tr at the end of fiscal year 2012-13 — almost three years ago. The major contribution to the increase in net public debt came from an almost 40pc rise in domestic debt, which rose from Rs8.686tr at the end of 2013 to Rs12.14tr at the end of the first quarter of the current fiscal year (FY 2016-17).

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In the same period, foreign debt posted an increase of 28pc and went from Rs4.796tr in 2013 to Rs6.14tr on Sept 30, 2016.

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Explaining the reasons behind the surge, the finance ministry said that 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 accelerate the pace of economic development and make positive contributions towards developing the country’s infrastructure 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. Another purpose of these loans was to build external buffers to protect against exchange rate volatility and absorb external shocks.

The ministry explained that domestic debt was perpetual in nature and mostly refinanced year-on-year, while most of the external loans contracted by the present government were ‘economical’ and dominated by long-term funding, which would be used to retire the corresponding amount of expensive domestic borrowings. External loans are repaid through budgetary allocations based on the amortisation schedule of each loan.

In its response, the ministry claimed that it had been able — over the past three years — to significantly reduce economic vulnerabilities and had implemented various growth-supporting structural reforms. This had resulted in an improvement in the country’s debt repayment capacity and had allowed it to control expenditures.

For example, the national economy continued to maintain a growth momentum above four per cent for real gross domestic product (GDP) for three years in a row, reaching a growth rate of 4.71pc in 2015-16, the highest in eight years.

On top of that, economic growth was projected to continue its upward acceleration on the back of growth-supporting structural reforms, the ministry said, adding that development projects linked to the China-Pakistan Economic Corridor in the fields of energy and infrastructure were also expected to contribute an additional two percentage points to GDP growth in the years to come.

The government also claimed to have successfully brought down the fiscal deficit from 8.2pc of the GDP in 2012-13 to 4.6pc in 2015-16, with a target to further curtail 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.

Moreover, the ministry claimed that despite repayments by the present government of foreign loans worth over $12bn that were obtained by the previous governments, foreign exchange reserves currently stood at over $23bn, up from the $11bn mark at the end of June 2013.

It also claimed to have reduced tax exemptions, leading the tax-to-GDP ratio to increase from 9.8pc in 2012-13 to 12.4pc of the GDP in 2015-16, while public sector investments increased from Rs348bn in 2013 to Rs800bn this year.

Published in Dawn February 6th, 2017