As the government's reliance on expensive foreign funding continued to rise, the Pakistan Industrial & Traders Association Front (PIAF) has called for generating cheap funding, which dropped significantly.
PIAF Chairman Mian Nauman Kabir in a statement on Saturday said that Pakistan's external debt was primarily increasing because of the government's inability to enhance exports and attract foreign direct investment. Asking the economic managers to review their irresponsible borrowing behaviour, he said the government has added more than US 10.82 billion dollars foreign loans in public debt on high interest only in one year.
Quoting the latest statistics issued by the central bank, PIAF chairman said that the reliance on commercial banks continued during the present regime, which is more expensive, as without passing through due diligence process the Ministry of Finance borrowed over $4 billion through foreign commercial banks on short-term basis.
The short-term commercial borrowing was usually obtained at higher rates and without undertaking any due diligence in shape of seeking approval of the cabinet or the Economic Coordination Committee.
The PIAF Chairman, who also served as the interim provincial minister, said that it's a worrying indicator because government reliance on short-term commercial borrowing is increasing, which is expensive, while our capacity to draw foreign inflows from cheap mode of financing is decreasing with the passage of time.
According to statistics, the Asian Development Bank had provided $541.17 million in July-June period of 2018-19 against $1.508 billion obtained in the same period of last financial year, indicating that the ADB's loan disbursement, which was obtained at low interest rate, decreased by $967 million. Similarly, the World Bank gave $652.75 million during the fiscal year 2018-19 against $1.731 billion provided to Islamabad through IDA and IBRD facility in the financial year 2017-18.
The official data showed that Chinese deposits of $2 billion were also made part of the total disbursements of loans and grants obtained during the fiscal year 2018-19. The government has obtained $2.111 billion through multilateral creditors such as World Bank, Asian Development Bank, IDB and others in fiscal year 2018-19 against $3.87 billion in the same period of last financial year 2017-18.
Meanwhile, PIAF Chairman expressed serious concern over the sluggish performance in the industrial sector of the country due to wrong policies of the government, showing the economy is likely to slow down further despite government expectations for the GDP growth to clock in at 3.3pc in FY2018-19.
According to the Pakistan Bureau of Statistics, the Large-Scale Manufacturing (LSM) sector shrank 3.78 percent during May from a year ago, as the contraction came amid dismal performance in the fertilizer, leather, pharmaceutical, and chemical sectors raising fears of large-scale layoffs in the industrial sector, he said.
On a year-on-year basis, the LSM dipped by 3.5pc during the first 11 months (July-May) of this fiscal year - falling far behind the 8.1pc target set for the government for FY2018-19.
The LSM data reveals various factors which led to the slowdown including lower Public Sector Development Programme expenditures compared to last year, deceleration in the private sector construction activities and consumer spending on durable goods. The effect was more noticeable in the construction-allied industries, he added.
Copyright Business Recorder, 2019
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