Debt repayment, servicing for past loans: PTI government had to borrow $24 billion, MoF tells cabinet

ISLAMABAD: The Ministry of Finance (MoF) on Tuesday gave an overall picture of the country's total debt to the federal cabinet, and stated that the present government had to borrow $24 billion for repayment of debt and debt servicing for the past loans.

The meeting of the federal cabinet presided over by Prime Minister Imran Khan was informed that the present government was left with no other option but to resort to more borrowing, and had taken $24 billion loan, including a borrowing of $2 billion by the interim setup. The government made repayment of $10 billion yearly compared to $5.5 billion of previous governments. The meeting was also informed that educational activities, suspended after the Covid-10 pandemic, were being restored from today (Wednesday).

The Finance Division gave a detailed briefing on debt and debt servicing to the federal cabinet for the fiscal year 2018 to 2020, and stated that the government had inherited a debt of Rs30 trillion, and its servicing compelled it to take more loans.

In 2019, there was an increase of Rs7.7 trillion in the debt, and one of the major factors for its increase was exchange rate that contributed Rs3.1 trillion to the debt, the meeting was informed.

The meeting was also informed that due to Covid-19, the government suffered a Rs1 trillion revenue loss and from the total tax collection Rs2.1 trillion was used for servicing of debt taken by the previous governments, and Rs1 trillion was set aside as cash buffer.

The meeting was informed that for the first time, primary deficit was in surplus, however, it was affected due to coronavirus pandemic in the country. The Finance Division informed the meeting that the government had taken steps during the last two years to bring about stability in interchange rate, reproofing of domestic debt, and improvement in external debt as well as to increase exports and boost foreign exchange reserves.

On power sector reforms, the meeting was informed that if the government had not taken the measures, the circular debt, which was Rs450 billion in 2018, would have increased to Rs853 billion in 2020, and Rs1,610 billion by 2023. Due to the government measures, this year the circular debt is projected at Rs538 billion instead of Rs853 billion.

The negotiations with the IPPs to rationalise the return on equity, and shutdown of low performing loans, reforms in subsidy system, would help government save Rs620 billion. The meeting was informed that transmission and distribution losses that had been reduced to 17.7 percent in 2019 were being further reduced.

Transmission and distribution losses would be reduced to 16.3 percent by 2023 and recovery has also been improving and it would be increased to 97.7 percent in 2023. The meeting was informed that a saving of Rs100 billion would be made as a result of negotiations with GENCOs, while Rs61.6 billion saving is expected in three years as a result of an agreement with independent power producers.

The cabinet approved start of flights by Virgin Airlines between Pakistan and Britain, and gave approval to pre-shipment agencies for one-time ship inspection of wheat imported by the TCP, visa policy with respect to Afghanistan, appointment of a biological analyst, appointment of president and vice president of Pakistan and Medical Dental Council, and the chairman PCSIR.

The cabinet was also submitted an inquiry report for installation of telemetry system, the cabinet, while approving the recommendations of the report decided to take the process for removal of the members of Irsa ahead.

The meeting decided that as the members of KP, Balochistan and Sindh had completed their tenure, the Punjab government would be asked to review performance of its member. The meeting also decided that the federal government would also appoint a competent person as member and carry out audit of Irsa a performance; it will also make changes in its law.

The cabinet also gave post-facto approval to the appointment of CEO of Neelum-Jhelum Hydro Project, and ratified decisions of the ECC meeting of September 23rd, 2020, and the Cabinet Committee on Energy (CCoE) dated September 24.

The prime minister has reportedly stated that the government would bring back Nawaz Sharif from Britain, and the government would not give "NRO" in corruption cases. The meeting discussed overall political, economic and national security situation as well as statements by the Pakistan Muslim League (N) leaders following the arrest of the leader of the opposition Shahbaz Sharif.

Copyright Business Recorder, 2020