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Pakistan’s public debt increases by 21% to 33.4 trillion rupees

 


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PHOTO: FILE

PHOTO: FILE

PHOTO: FILE
CREATIVE TRIBUNE

ISLAMABAD: Prime Minister Imran Khan wants him to speak a year ago to cut public debt in half, but his government has added nearly 6 trillion rupees to the debt burden in just one year, according to a latest report. from the State Bank of Pakistan (SBP).

Central government debt increased 21.3 percent to 33.4 trillion rupees in late February from the same month last year, according to statistics released Tuesday by the central bank.

In February of last year, Prime Minister Imran promised to reduce the public debt to 20 trillion rupees before leaving the office. But the political guidelines of the past year indicate that by the time the Pakistani Tehreek-e-Insaf (PTI) government leaves office in 2023, the debt level will almost double.

Successive governments had added 24.2 trillion rupees to public debt in 71 years, which according to projections by the Ministry of Finance could reach at least 47 trillion rupees within five years of the PTI government.

When Imran Khan became Prime Minister, the central government debt was close to 24.2 trillion rupees and about 9.2 trillion rupees have been added so far, excluding liabilities. Central government debt, which was 27.5 trillion rupees in February last year, jumped to 33.4 trillion rupees in February this year, according to the SBP bulletin.

In absolute terms, there was an increase of 5.9 trillion rupees or 21.3% in central government debt at the end of February.

The situation is likely to worsen due to the increase in government commitments following Covid-19 and an expected large reduction in tax and non-tax revenues. Prime Minister Imran has appointed four presidents of the Federal Revenue Office (FBR) in the past 20 months, but the shortfall has widened.

Last week, the Prime Minister reached another political compromise and allowed wealthy builders and developers to invest their black money in the real estate sector instead of taking them on. Earlier, he reached a compromise with merchants which contributed to a further erosion of the tax base.

The government also lacked the political will to enforce the requirement to declare the computerized national identity card (CNIC) number when purchasing goods worth Rs 50,000.

The Pakistan rupee started to lose its value against the US dollar again and closed Tuesday at Rs167.9, which will have implications for the level of debt for March and April. Central government debt increased 5.2% to Rs 33.4 trillion in eight months until the end of February this year, an addition of Rs 1,644 billion, according to the SBP.

General government debt, including guarantees and loans from the International Monetary Fund (IMF), reached 88% of gross domestic product (GDP) at the end of the previous year, according to the IMF.

Also in the current fiscal year, the IMF revised its projection of debt and public liabilities upward to 84.7 percent of GDP, or 37.6 trillion rupees, a report said.

But these projections are subject to further revision due to the implications of the coronavirus for the economy and government revenues.

Central government debt includes long and short-term domestic debt and external debt.

The SBP report showed that total central government domestic debt increased from 20.7 trillion rupees in June last year to 22.7 trillion rupees in February, a net addition of 1.4 trillion rupees. or 6.5%. A significant increase in federal debt was due to long-term debt, which went from 15.2 trillion rupees to 16.9 trillion rupees. There has been an increase of 1.7 trillion rupees or 10.8% in the long-term debt.

This was due to the government’s decision to convert its short-term loans from the central bank into long-term debt.

Short-term domestic debt increased from Rs5.5 trillion in June 2019 to Rs5.3 trillion in February this year. There has been a reduction of Rs200 billion in short-term debt.

Federal government debt, acquired through the sale of treasury bills (MTB) to commercial banks, began to rise again after remaining on a downward path. The ATV-based debt went from 4,900 billion rupees to just over 5,000 billion rupees. The central government’s external debt fell from Rs11 trillion in June to Rs11.23 trillion in February.

The central government’s external debt has not increased at a rapid rate due to the recording of IMF commitments and hot foreign currencies in the books of the central bank. This external debt should increase again due to the devaluation of the currency.

Foreign hot money has also started to flow gradually, with foreign investors having so far withdrawn $ 2.2 billion, mostly British investors, out of total inflows of $ 3.4 billion.

Posted in The Express Tribune, April 8e, 2020.

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