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ISLAMABAD: Minister for Economic Affairs Division, Makhdoom Khusro Bakhtyar has said that Pakistan Muslim League (N) government borrowed $ 50 billion in five years (2013-18) and paid back $ 27 billion during this period at an average of $ 4.5 billion per annum.

He made this claim at a meeting of the Federal Cabinet held on September 29, 2020, presided over by Prime Minister Imran Khan. Prime Minister’s Advisor on Finance and Revenue, Dr Abdul Hafeez Shaikh gave a de detailed presentation to the Cabinet.

During discussion, when the Prime Minister asked for a comparison of present government's external debt with the previous government, Minister for EAD said that the present government borrowed $ 22 billion during first two years of its tenure and repaid loans/interest to the tune of $ 20 billion during this period, at an average of $ 10 billion per annum.

Hafeez Shaikh informed the Cabinet that Federation will never have enough money after paying 60 per cent of revenue to the provinces.

"Debt remains a major challenge and requires careful management. There is a need for coordination across government and lenders and vigilance in revenue and expenditure management," he added.

The cabinet was informed that the long-term and low-cost multilateral debt in June 18 was $ 35.2 billion, in June 2019, $ 34.2 billion and June 2020, $ 39.4 billion, whereas bilateral debt which was $ 20.3 billion in June 18, increased to $ 24 billion in June 19 and then $ 24.4 billion in June 20. Borrowing through Eurobonds which was $ 7.3 billion in June 18, reduced to $ 6.3 billion in June 19 and $ 5.3 billion in June 20. Pak Rupee depreciated by only 3 per cent against USD in FY 2019-20.

The country's total debt has reached Rs 44.3 trillion of which public debt was Rs 36.4 trillion, external liabilities of SBP were Rs 1.7 trillion, PSE's debt, Rs 2.2 trillion, commodity operation, Rs 0.6 trillion and private sector external debt, Rs 3.4 trillion. Of Rs 36.4 trillion public debt, domestic debt was Rs 23.3 trillion, external debt, Rs 13.3 trillion and GDP, Rs 41.7 trillion. Public debt to GDP has reached to 87.2 per cent. Public debt increased by Rs 7.7 trillion during FY 2018-19.

The Prime Minister also asked the Advisor on Finance and Revenue to prepare a comparative report on Pakistan's economy, affected by COVID 19, in comparison to neighboring countries like India, Bangladesh, Sri Lanka, etc.

The Cabinet was further informed that the previous government used the foreign exchange reserves of $ 23 billion to intervene and artificially keep the exchange rate steady. As a result of this flawed policy, the exports became expensive whereas the imports became cheaper and witnessed unprecedented surge, causing deindustrialization of the country.

Advisor Finance, Dr. Abdul Hafeez Shaikh, while alluding to the hemorrhaging State Owned Enterprises (SOEs), stressed greater focus on their revival or privatization. The members also urged reforming the FBR on fast track to raise the revenues.

Way forward, given the difficulty in revisiting the 18th amendment and NFC Award, was solicited from the Advisor to the Prime Minister on Finance & Revenue and need for implementing the Provincial Finance Award was highlighted.

A question was also asked as to where the public debt stands vis-à-vis the ceiling set by Fiscal Responsibility and Debt Limitation Act, 2005. The status of hedging the petroleum prices, when they were quite low, was also asked.

Responding to the suggestions and queries of the Cabinet members, Advisor to the Prime Minister on Finance & Revenue apprised that a detailed presentation on SOEs would be given to the members in 2-3 weeks.

On steps needed to be taken in the present scenario, it was informed that different incentive packages were being given to the industry to stimulate growth.

While highlighting the need to make Pakistan an attractive FDI destination, he pointed out that investment in infrastructure through public private partnership mode could compensate for the lack of fiscal space and reduce dependence on PSDP.

Regarding hedging, it was apprised that the experts in the field had advised against it, due to price volatility in the petroleum market at this time, however, the possibility was still being explored in consultation with Special Assistant to the Prime Minister on Petroleum Division. Hafeez Sheikh further stated that the Fiscal Responsibility and Debt Limitation Act, 2005, set the ceiling of 60% as debt to GDP ratio, but this had been repeatedly breached by the governments since the only requirement was to give statement on the floor of the House, justifying crossing the limit. The Prime Minister, while underscoring the preponderance of the need for increasing exports alluded to the example of Turkey which extricated itself from similar debt problem that faces Pakistan.

Copyright Business Recorder, 2020

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