LAHORE: In the second quarter of this year, the Punjab government’s debt stock, local and external, bulged from Rs 908 billion to Rs 955 billion with an increase of 5 percent (Rs 46.8 billion).
As per a report released by the Punjab Finance Ministry for the period between April 1 and June 30, domestic loans showed decline from Rs 5.579 billion to Rs 5.192 billion whereas external loans swelled from Rs 902.105 billion to Rs 949.335 billion.
Citing the reason for the increase in the loans, the report observed that this growth is mainly due to foreign exchange loss of Rs 31 billion realized during last three months period (April-June). “Moreover, the amount of net new debt received during the quarter under review amounts to Rs 15.8 billion. The total amount of loan recorded during FY 2020-21 amounts to Rs 14.7 billion, approximately,” it added.
The outstanding debt stock as on June 30 2021 is exclusive of guarantees amount awarded to various projects/entities of the Punjab government; domestic borrowing limit awarded by National Economic Council (NEC) to Punjab is utilised to offer such guarantees. The total amount of guarantees outstanding remains unchanged from March 31, which stood at Rs 48.75 billion.
The report also pointed out that commodity financing debt stock amounting to Rs 548 billion (as of June 30) is not included in above given debt stock of Rs 955 billion. The commodity financing is raised on the security of wheat stocks and the guarantee of the federal government. The amount of wheat stock available with the government amounts to Rs. 205 billion approximately (as on June 30); repayment of this loan along with incidentals (including markup) is made from sale proceeds of the purchased wheat stock. The provincial government subsidises the gap between purchasing cost and the sale price.
A major share of government borrowing comes from the International Development Association (IBA) that is 33 percent of the total outstanding (Rs 317,079 million) followed by Asian Development Bank (ABD) 25 percent (Rs 236,346 million), China 23 percent (Rs 220,837 million), International Bank for Reconstruction and Development (IBRD) 14 percent (Rs 132,490 million), Japan International Cooperation Agency (JICA) 3 percent (Rs 26,140 million), International Fund for Agriculture Development (IFAD) 1 percent (Rs 12,526 million), the federal government 1 percent (Rs 5,192 million), France 0.4 percent (Rs 3,811 million) and Islamic Development Bank (IDB) 0.01 percent (Rs 106 million).
The report says that the agriculture and livestock sector remained the major recipient of government borrowing, which amounts to Rs 267,026 million (28 percent of the total outstanding), followed by the transport and communication Rs 224,889 million (24 percent), education Rs 209,965 million (22 percent), urban and community development Rs 113,156 million (12 percent), governance Rs 57,199 million (6 percent), health Rs 44,626 million (5 percent), energy Rs 16,982 million (2 percent), industries and infrastructure Rs 16,386 million (2 percent), tourism Rs 2,593 million (0.3 percent) and environment Rs 1,705 million (0.2 percent).
Copyright Business Recorder, 2021
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