The present government has borrowed Rs 3,653 billion unprecedentedly during the first eight months of the current fiscal year while depreciation of exchange rate impact added Rs 1,421 billion to the public debt. This was revealed by a senior official of Debt Policy and Coordination Office of Finance Division while briefing the National Assembly's Standing Committee on Finance, chaired by Faiz Ullah, on public debt.
After members expressed concerns over increase in public debt during the last 8 months, special secretary finance argued that depleting foreign exchange reserves and current account deficit as well as other factors are behind the rise in the borrowing. He added that Rs 1,400 billion was spent on interest of the earlier borrowings.
Pakistan public debt has reached 74.5 percent of the GDP, 14 percent higher against the limit of 60 percent set in Fiscal Responsibility and Debt Limitation Act 2005, stated the Debt Office in a presentation made to the committee on total public debt in last ten years with foreign & domestic components and future trends.
The meeting was told that Pakistan's total debt by March 2019 stood at Rs 28.6 trillion with 47 percent component of domestic debt and 27.7 percent external debt. There would be an increase in debt for a short period in near future, however, the debt to GDP ratio will reduce from current level of 74.5 percent of the GDP to 65 percent in five years time due to increase in GDP size, he added.
Future objectives and strategies of the government, the Finance Ministry stated, are to bring and maintain public debt to GDP ratio and debt service to revenue ratio to a sustainable level and increase maturity profile of public debt portfolio.
The official said an international expert has been hired to prepare a three years borrowing strategy to maximise debt issuance through international capital market and continue to seek long-term concessional loans for development purpose.
The Finance Ministry official added that implementation of formal international bond programme (Shell Registration with US Securities and Exchange Commission (SEC) would enable the country to issue bonds at short-term notice. He further said that the government's focus in future would be on long-term borrowing and even borrowing from the domestic market would be done on floating rate instead of fixed rate.
The government, he added, has been taking long-term loans at relatively higher rate from domestic market and it plans to borrow on floating rate.
On the agenda item for considering the implementation status of the previous recommendations to the Federal Board of Revenue (FBR), the director general FBR told the committee that FBR has forwarded the recommendations to Ministry of Finance with the request to abolish the regulatory duty on import of tyres in the upcoming federal budget for fiscal year 2019-20.
The committee was displeased on non-compliance with the recommendations pertaining to FPCCI and CCI, which were made by the committee in its meeting held on April 15 & 16, 2019.
The meeting deferred agenda pertaining to the Foreign Exchange Regulation (Amendment) Bill, 2019 on the request of the Ministry of Finance and governor State Bank of Pakistan (SBP).
The committee discussed the NBP Bangladesh scam and actions taken by the bank against the employees involved in said scam. The director NBP briefed the committee about the measures taken by the Institutional Discipline Wing, HR Management Group, after receipt of KPMG report.