Total debt, liabilities: Government enumerates reasons behind increase

Finance Division has stated that the increase in total debt and liabilities by Rs 11.61 trillion was due to finance the budget deficit, depreciation of exchange rate as well and State Bank of Pakistan (SBP) foreign exchange liabilities and borrowing by PSEs etc. Ministry of Finance has stated Debt Policy Statement and Fiscal Policy Statement is laid before the National Assembly every year to fulfill the requirements of section 6 and 7 of the Fiscal Responsibility and Debt Limitation Act 2005.

The recent statements cover the 15-month period including fiscal year 2018-19 and first quarter of fiscal year 2019-20 and contain all factual information with respect to debt and fiscal performance over the stated period.

The figure of increase in total debt and liabilities by Rs 11.61 trillion constitutes five components; (i) total Public Debt;(ii) Public Sector Entities' (PSE) Debt;(iii) debt for commodity operations;(iv) foreign exchange liabilities of State Bank of Pakistan (SBP);(v) private sector's external debt.

The Ministry added that of the total increase of Rs 11.61 trillion in total debt and liabilities during Jul 2018- September 2019 included; (i) Rs 3.54 trillion (31% of the increase) due to currency depreciation which is a consequence of the misplaced exchange-rate, industrial, and trade policies of the previous government that led to large and unsustainable current account deficits and ultimately to sharp exchange rate adjustment; (ii) Rs 3.13 trillion (27% of the increase) is on account of cash balances and SBP's foreign exchange liabilities and it should not be interpreted as Debt because it is offset by cash balances of government and liquid assets of SBP; (iii) Rs 4.11 trillion (35% of the increase) has been borrowed for financing of fiscal deficit; (iv) Rs 0.47 trillion (4% of the increase) has been borrowed by PSEs for spending on their financing needs; (v) Rs 0.08 trillion (-1% of the increase) has been retired on account of commodity operations which is a welcome development; (vi) Rs 0.25 trillion (2% of the increase) is due to accounting adjustment due to difference in realized value and face value of long-term bonds issued during this period; (vii) Rs 0.18 trillion (2% of the increase) has been borrowed by private sector from external sources which is a healthy sign indicating private sector's capacity to borrow from abroad for domestic investments.-PR