The outgoing government added more than 18 trillion rupees to public debt during its three-and-a-half-year tenure, which was more than the liabilities accrued by any government in 75 years, a statement from the central bank.
As a result, federal government debt jumped to 42.8 trillion rupees in February 2022, an addition of 18.1 trillion rupees in three and a half years, according to the State Bank’s monthly debt bulletin. of Pakistan (SBP) released on Tuesday.
Prime Minister Imran Khan’s two rival parties, the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan People’s Party (PPP), had added nearly 18 trillion rupees to the public debt in 10 years – a marks that Pakistan Tehreek-e- Insaf (PTI) government passed in three and a half years.
The Rs 42.8 trillion figure excludes liabilities and debt obtained in March, which was the last month of the PTI government.
Khan lost power on Sunday April 3, when he allegedly took an unconstitutional step to avoid defeat in a no-confidence motion tabled by opposition parties.
From September 1, 2018 to the end of February 2022, the PTI government added an average of 14.2 billion rupees per day to public debt, more than double the average increase of the PML-N period of 5.6 billion rupees. rupees per day.
From 2008 to 2018, the daily increase in government debt was 2.7 trillion rupees, which over the past three and a half years has risen to 14.2 trillion rupees.
Total public debt increased by 73% from September 2018 to February 2022, an unsustainable average increase of 20.3% each year.
In February 2019, Imran Khan told The Express Tribune at the Prime Minister’s office that if he could not reduce the public debt to 20 trillion rupees by the end of his term, it would mean his government had no not kept its promises.
The government also amended the Fiscal Responsibility and Debt Limitation Act 2005 to ease the debt ceiling after failing to reduce the debt burden to 59% of gross domestic product (GDP) by the end of the previous fiscal year.
During his tenure, Imran Khan was unable to strengthen the Debt Policy Office which was run on an ad hoc basis.
The Ministry of Finance has also been left at the mercy of commercial banks which take loans from the central bank at around 9.8% but provide funds to the government at 12.7% for up to one year.
When the PML-N government completed its five-year term, the total public debt stood at 24.95 trillion rupees, or 72.5% of GDP. In just three years, it jumped to 83.5% of GDP before the rebasing of the economy.
Imran Khan had also set up a debt inquiry commission to investigate the reasons for adding 18 trillion rupees to the stock of debt in 10 years. But his findings were never made public.
The accumulation of debt is the direct result of the gap between spending and revenue, which widens due to the inelasticity of debt service and defense needs, and the inability of the Federal Board of Revenue (FBR) to improve revenue collection to a sustainable level.
The sharp depreciation of the currency has also contributed to the federal government’s debt.
The total domestic debt of the Federal Government has increased to 27.7 trillion rupees, an addition of 10.9 trillion rupees (or 65%), over the past three and a half years. Before Imran Khan took office in 2018, the domestic debt stood at 16.4 trillion rupees.
Debt obtained through floating bonds rose to 17.7 trillion rupees from 8.7 trillion rupees just three and a half years ago.
The central bank for the first time included a debt of 374 billion rupees which it granted to the federal government due to Pakistan’s increase in the share of the International Monetary Fund (IMF).
Short-term debt rose from 9.6 trillion rupees to 5.5 trillion rupees after the outgoing government rescheduled its borrowing from the central bank.
The Federal Government’s external debt has increased at an alarming rate of 90% to Rs 15.1 trillion over the past three and a half years.
There was a net increase of Rs 7.1 trillion in external debt, largely due to currency depreciation and the building up of foreign currency reserves through borrowing.
At the end of August 2018, the external debt stood at 7.8 trillion rupees.
The Rs 12.4 trillion worth of external public debt does not include loans obtained for building up reserves and currency swap arrangements. These loans are borne by the central bank.
In February 2022, the rupee-dollar parity was 177.5 rupees for one dollar. In August 2018, the value of the dollar was equal to Rs124.2, suggesting a massive depreciation of almost Rs54 or 29.4%.
The current parity is above Rs185 – the lowest value in the country’s 75-year history. The direct consequence of debt accumulation is a huge increase in the cost of servicing debt. Debt service, which three and a half years ago stood at 1.5 trillion rupees, is expected to remain above 3.2 trillion rupees by the end of the current financial year.
Published in The Express Tribune, April 6and2022.
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