It is highly disturbing, rather shocking, to know that Pakistan's outstanding stock of debt - domestic and external - continues to mount unabatedly. According to the latest data released by the State Bank, the country's total debt (domestic and external) surged to an all-time high of Rs 26.453 trillion at the end of November, 2018 compared to Rs 24.212 trillion on 30th June, 2018, depicting an increase of Rs 2.24 trillion or 9.25 percent. While federal government's domestic debt rose by Rs 907 billion to Rs 17.323 trillion, foreign debt witnessed a sharper increase as external borrowings shot up by Rs 1.334 trillion to reach Rs 9.13 trillion during the first five months of the current fiscal year. It may be mentioned here that the government increased its domestic debt through short-term borrowings, relying mainly on the treasury bills which increased by Rs 1.168 trillion to Rs 10.057 trillion during July-November 2018. However, the size of federal government's bonds decreased significantly by Rs 333 billion to Rs 3.467 trillion during this period. The government could not accumulate much through National Saving Schemes either as their holdings by the savers edged up by a mere Rs 3.3 billion to Rs 2.733 trillion. It may be noted that domestic debt is composed of Rs 4.386 trillion of permanent debt, Rs 2.874 trillion of unfunded debt and Rs 10 trillion of floating debt while external debt includes long-term loans amounting to Rs 9.039 trillion and short-term loans worth Rs 90.6 billion.
The jump of such a magnitude in total indebtedness of the country in a short period of five months reflects a higher fiscal deficit than envisaged at the time of budget formulation due to low revenue collection and growing current expenditures while the huge current account deficit has forced the authorities to seek foreign loans to meet the external gap. A considerable appreciation of US dollar against Pak rupee from about Rs 121 at end June to about Rs 140 by the end of November, 2018 - representing an appreciation of over 15 percent - was another reason for the sharp rise in external borrowings in rupee terms. However, whatever the reasons, the recent jump of nearly 10 percent in aggregate debt is a very bad news for the country. Moreover, this has been happening under the government of a party that came to power on the promise of self-reliance and greater austerity in every sphere of governance. Unfortunately, however, the PTI government has so far been unable to meet this commitment as indicated by growing fiscal deficit woes. It is time for the government to come up with concrete plans to reduce and ultimately eliminate the present level of budget deficit so that the level of domestic debt is contained to a reasonable level. So far as external sector is concerned, the government has made the right moves to narrow the trade deficit by substantially depreciating the Pak rupee and imposing duties on various items of imports. Though these steps are in the right direction, they have so far not made a large impact on the current account balance, forcing the government to borrow extensively from friendly countries in order to address country's current account and arrest the dwindling trend in foreign exchange reserves. The country has so far received dollar 2 billion from Saudi Arabia while the authorities expect to get more from the UAE and China. However, the accumulation of foreign exchange through the grace of friendly countries would certainly increase the size of external debt as well as its servicing besides making the options of the country limited in the coming years and mortgaging the future of our next generations.
It may be highlighted that a Fiscal Responsibility and Debt Limitation (FRDL) Bill aimed at eliminating revenue deficit and reducing public debt to a prudent level was passed by the National Assembly on 3rd March, 2005. The Bill, as passed, was meant to bring down the revenue deficit to zero by 30th June, 2008 and maintain a revenue surplus thereafter to reduce total public debt to 60 percent of GDP by June, 2013 and maintain it below this level in the subsequent years. The government was bound to keep the National Assembly informed about emerging scenarios in the relevant fields and any deviations from the set course were only to be allowed in exceptional circumstances. Alas, this Bill which could act as a guarantee for sound fiscal management was violated with impunity. The present government could highlight the limitations imposed by this Bill for ensuring a prudent fiscal management and contain the rising level of domestic debt.