Despite small fiscal deficit Pakistan''''s total debt and liabilities (TDL) stock recorded a substantial 27.0 percent increase in FY09, the State Bank revealed in its annual report on Thursday. The SBP said continued strong growth in the stock of TDL in FY09 reflects the fact that imbalances in the overall fiscal account as well as the country''''s current account are still large.
It also incorporates the lower availability of non-debt creating flows, the impact of the build-up reserves flowing, increased inflows of multilateral assistances as well as the increase in the rupee value of external debt due to adverse exchange rate movements.
Consequently, overall debt sustainability indicators of the country remained under pressure for the second successive year in FY09. In particular, while the ratio of total debt to GDP witnessed slight improvement during FY09, it is still significantly higher than the low of 57.2 percent of GDP recorded in FY07. Also, the ratio of debt servicing to total revenues, which reflects the government''''s capacity to service the country''''s debt, rose to 49.1 percent in FY09 from 45.3 percent in FY08, the report said.
Also, the Fiscal Responsibility and Debt Limitation Act, 2008 target of 2.5 percentage point reduction in the stock of TDL, as percent of GDP, in every financial year was not met for the second consecutive year. The deterioration in debt indicators necessitates an urgent revisit to the debt management policy for an early return to sustainable debt path, it added.
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