ISLAMABAD: The Finance Ministry has claimed that the cost of country's domestic debt has been reduced by re-profiling of debt and its tenure has been increased, while acknowledging that the International Monetary Fund (IMF) has been pointing towards the erosion of Pakistan debt repayment capacity with a suggestion not to take more loans.
On Thursday, the officials of the Finance Ministry gave a background briefing to the media persons about their efforts for re-profiling of domestic debt. The presentation revealed that Pakistan's debt to GDP ratio has increased to 87 percent during the last two years of the Pakistan Tehreek-e-Insaf (PTI) government from 72.1 percent in 2018 due to borrowing of Rs11.3 trillion.
The Finance Ministry said that three-10-15, and 20-year bonds have been issued in the domestic market. The ministry attributed depreciation of exchange rate as well debt servicing and primary balance as major factors for increase in total debt during the last two years.
Finance Ministry officials said Rs 38 billion PIBs were issued against the bids of Rs 110 billion; the target was Rs 140 billion. The official IMF has been stating that Pakistan debt repayment capacity was eroded and the country should not take more loans.
The total public debt has been increased to Rs36.3 trillion by the end of June 2020 with Rs23.2 trillion domestic debt and Rs13.1 trillion external debt as opposed to Rs25 trillion in 2017-2018 and Rs14.3 trillion in 2013-2014, while the total debt was Rs6.1 trillion in 2007-2008.
Exchange rate depreciation added Rs3.5 trillion to the public debt and debt servicing Rs4.7 trillion to the total debt during the last two years. This led to the change in public debt to Rs11.3 trillion in the last two years as opposed to Rs8.5 trillion during 2009-2013 and Rs10.7 trillion during 2014-2018.
The total public debt has been increased to 36.3 trillion by the end of June 2020 They added that the government has retired Rs570 billion till June 2020 to the State Bank of Pakistan (SBP) and Rs285 billion in the month of July 2020 by borrowing from the banks. They added that the last domestic bond of 15 years was issued in 2015.
According to the Finance Ministry, three-year domestic Rs16 billion PIBs have been issued at 8.18 percent, 10-year Rs55 million at 8.945 percent, 15-year bond have been issued at 9.91 percent, and 20-year at 10.4270. They added that the government borrowing at this point in time from the banks will crowd out the private sector investment as businesses are showing interest to borrow from the banks following decrease in policy rate.
The officials were of the view that this has been the best time to the international marker for issuance of bonds and government is planning to issue Islamic Sukuk bonds.
Copyright Business Recorder, 2020
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