Punjab govt liabilities surge by Rs113bn due to rupee depreciation

LAHORE: The Punjab government’s liabilities, local and external, bulged by Rs113 billion in the last quarter of the fiscal year 2021-22, mainly due to the depreciation of the Pak rupee.

As per a report released by the Punjab Finance Ministry for the period between April 1 and June 30, the domestic loans showed a slight decline from Rs 3.975 billion to Rs 3.569 billion, a reduction of 0.3 percent, whereas the external loans swelled by 10.4 percent, from Rs 1.093473 trillion to Rs 1.206,664 trillion.

In the report, it was noted that 99.7 percent of the total outstanding debt stock is denominated in foreign currency and thus the Punjab government’s debt is highly exposed to the fluctuation in foreign exchange. Hence, the government had to bear Rs 111.6 billion extra liability (after using the forex rates of June 30) on the account of the rupee’s depreciation. The report pointed out that the above-given debt stock is exclusive of wheat debt amounting to Rs 629 billion (as of June 30) against the coverage of wheat stock amounting to Rs 265 billion.

A major share of government borrowing comes from the International Development Association (IDA) that is 33 percent (Rs 400,959 million) of the total outstanding followed by China 24 percent (Rs 285,257 million), Asian Development Bank (ADB) 23 percent (Rs 282,653 million), International Bank for Reconstruction and Development (IBRD) 16 percent (Rs 186,122 million), Japan International Cooperation Agency (JICA) 2 percent (Rs 25,505 million), International Fund for Agriculture Development (IFAD) 2 percent (Rs 18,586 million), France 0.3 percent (Rs 3,937million), federal government 0.3 percent (Rs 3,569 million), and Islamic Development Bank (IDB) 0.01 percent (Rs 78 million).

The report notes that of the total local and external debt, the share of borrowing from the World Bank (IBRD and IDA) constitutes 49 percent and China 24 percent.

As per the report, the agriculture and livestock sector remained the major recipient of government borrowing, which amounts to Rs 317,123 million (26 percent of the total outstanding) followed by transport and communication Rs 294,116 million (24 percent), education Rs 265,235 million (22 percent), urban and community development Rs 147,556 million (12 percent), governance Rs 80,269 million (7 percent), health Rs 54,252 million (4 percent), energy Rs 22,010 million (2 percent), industries and infrastructure Rs 19,997 million (2 percent), tourism Rs 4,061 million (0.3 percent) and environment Rs 2,044 million (0.2 percent).

The report revealed that during the fiscal year 2021-22, the Punjab government repaid Rs 68,393 million of the total loans, of which Rs 52,638 million was the principal amount and Rs 15,755 million was interest repayment. Moreover, projected debt servicing for the current fiscal year (2022-23) has been set at Rs 92,502 million, of which Rs 69,845 million constitutes principal repayment and Rs 22,664 million for interest repayment. The projected debt servicing was calculated on the exchange rate of June 30.

Copyright Business Recorder, 2022