Loans under sovereign guarantee: ‘Provinces soon to be allowed foreign borrowing’

RECORDER REPORT

ISLAMABAD: The Finance Ministry has said that an annual plan is being prepared under the 18th Amendment to allow provinces to borrow directly from foreign sources under federal sovereign guarantee.

Director-General of Debt Policy and Coordination Masroor Qureshi on Tuesday told the National Assembly’s Special Committee on Foreign and Domestic Loans, chaired by Shahnaz Wazir Ali.

Qureshi said that the Finance Ministry would submit the plan to the Council of Common Interest (CCI) for approval.

He stated that high fiscal deficit during the last four years was one of the major factors for the increase in public debt. He said that fiscal deficit was spurred by unforeseen factors such as rehabilitation of internally-displaced persons, floods during the past two successive years and escalation in oil and food prices in the international market as well as higher subsides for the power sector and security-related expenditures in addition to high government borrowing and public debt.

A senior official of the Planning Commission, Zafarul Hassan, informed the committee that there was some decrease in debt-to-GDP ratio because of revising the base of Gross Domestic Product.

Ahsan Iqbal of Pakistan Muslim League-N regretted that budget estimates brought before the Parliament at the time of announcement of budget were not factual. He argued that subsidy for power sector was estimated at Rs100 billion, but the actual spending was close to Rs300 billion by year-end.

Ahsan Iqbal also suggested that provincial and federal loans should be submitted on a quarterly basis to Parliament.

Secretary of the Economic Affairs Division Javed Iqbal said that the federal government was charging 0.5 percent of the amount of foreign loan as sovereign guarantee from provinces and all provincial foreign loans are subject to mandatory sovereign guarantee from federal government. 

Stressing the need for strengtheningthe debt wing, the committee said that public debt management at federal level was not in accordance with national needs.