ISLAMABAD: The government of Pakistan’s outstanding guarantees stood at $ 6.066 billion during the first three quarters (July-March) of FY 2021-22 with total guarantees at $ 6.876 billion, however the rupee-dollar parity is given at 183 to the dollar. According to the budget documents, domestic outstanding guarantees in rupee terms were Rs 2.7 trillion whereas total guarantees were 3.039 trillion. The government issued fresh/rollover guarantees/Letter of Comforts (LoCs) aggregating to Rs 344 billion or 0.5 percent of GDP. Total executed guarantees were Rs 3.039 trillion while outstanding stock was Rs 2.7 trillion by end March 2022.
Domestic outstanding guarantees were 1.587 trillion whereas total guarantees were recorded at Rs 1.778 trillion. External outstanding guarantees stood at Rs 1.113 trillion while total external guarantees were Rs1.262 trillion.
Out of total outstanding stock of GoP guarantees, the share of power sector was Rs 2.103 trillion (78 per cent), followed by Rs 230 billion by Aviation Division (9 per cent), Rs 111 billion by manufacturing & mining (4 per cent), financial by Rs 91 billion (3 per cent), oil & gas Rs 45 billion (2 per cent) and others Rs 120 billion (4 per cent).
The entity-wise break up of Rs 2.7 trillion GoP guarantees is as follows: (i) PHL- Rs 860 billion (32 per cent);(ii) PAEC- Rs 941 billion (35 per cent);(iii) PIACL- Rs 230 billion (9 per cent);(iv) Sindh Engro- Rs 74 billion (3 per cent); (v) NTDC- Rs 55 billion (2 per cent); (vi) others Rs 540 billion (20 per cent).
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The interest rate on outstanding stock of Rs 2.7 trillion was as follows: (i) floating rate Rs 1.673 trillion (62 per cent); and (ii) fixed rate Rs 1.026 trillion (38 per cent). The original maturities of major portion of guaranteed debt stock were 5 years and above. Guarantees issued against commodity operation are not included in the stipulated limit of 2 per cent of GDP as the loans are secured against the underlying commodity and are essential self-liquidating. These guarantees are issued against the commodity financing operations undertaken by TCP, Passco and provincial governments. The outstanding stock of commodity operations was Rs 845 billion at the end of March 2022.
The estimated guarantees to be issued from April 2022 till June 2023 will be Rs 664 billion of which Rs 124 billion would be for Public Private Partnership, Rs 40 billion NTDC, Jamshoro, Rs 10 billion, PIA Rs 20 billion, Wapda, 84 billion, Exim Bank, Rs 5 billion, SSGC, Rs 15 billion, Misc/contingencies, Rs 25 billion, Kamyab Pakistan Program (KPP) Rs 70 billion, KamyabJawan (YES) & other SBP schemes, Rs 57 billion, Pak Mortgage Refinance Scheme, Rs 30 billion and other Rs 185 billion.
The estimated repayment against existing guaranteed loans is Rs 244 billion whereas net issuance of guarantees (Q4 FY 22 & FY 23) will be Rs 408 billion, which implies that estimated closing guaranteed debt position as on June 30, 2022 would be Rs 3.459 trillion.
However, discrepancy has been noted in total amount mentioned in the budget documents. If opening guaranteed debt position (31 M is taken at Rs 3.039 trillion the addition of net issuance of guarantees of Rs 408 billion will take it to Rs 3.447 trillion, whereas the budget document are showing a figure of Rs 3.459 trillion.
Contingent liabilities of Pakistan are a primarily guarantees issued on behalf of Public Sector Enterprises (PSES). The sovereign guarantee is normally extended to improve financial viability of projects or activities undertaken by the government entities with significant social and economic benefits. It allows public sector companies to borrow money at lower cost or on more favorable terms and in some cases allows to fulfil the requirement where sovereign guarantee is a precondition for concessional loans from bilateral/multilateral agencies to sub-sovereign borrowers.
The volume of new government guarantees issued during a financial year is limited under Fiscal Responsibility and Debt Limitation Act which stipulates that the government shall not give guarantees aggregating to an amount exceeding two percent of the GDP in any financial year including those for rupee lending, rate of return, outright purchase agreements and other claims and commitments provided the renewal of existing guarantees shall be considered as issuing a new guarantee.
Copyright Business Recorder, 2022
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