The federal government wants to borrow Rs. 15 trillion to pay off for reservicing public debt during the new financial year. It will be the highest ever borrowing in Pakistan’s history.
Yesterday, Finance Minister Ishaq Dar placed various demands before the National Assembly. He asked for a huge sum in order to deal with the country’s total debt and its implications on the economy.
The loan will be obtained after July 1 following the start of fiscal year 2017-18.
Local and international economists have been constantly warning that Pakistan is headed for a “debt trap” but all these warnings have fallen on deaf ears.
Approval is a Must
The demand for Rs. 15 trillion was placed under Article 82 (I) of the Constitution as Charged Expenditures. This means that the National Assembly can only debate on the matter but won’t have the authority to veto the bill.
The debt servicing amount of Rs. 15 trillion is 44 percent (Rs. 4.6 trillion) higher than the previous fiscal year.
Apart from Rs. 1.4 trillion, which is part of the federal budget, the rest will not be borrowed from the aforementioned budget. It will be borrowed directly from domestic and foreign institutions to repay or service loans which had been obtained in the past.
Breakdown of Amounts to be Borrowed
Rs. 13.16 trillion will be borrowed to repay domestic debt in the upcoming fiscal year. In comparison, Rs. 8.38 trillion was borrowed in the outgoing fiscal year. That means that domestic repayments will increase by over 57 percent over fiscal year 2016-17. The remaining Rs. 1.23 trillion has been demanded to service domestic debt.
For financial year 2017-18, the federal government has predicted a budget deficit of Rs. 1.826 trillion, which is 4.7 percent of the GDP (Gross Domestic Product). To bridge this gap, Rs 968 billion will be loaned from the domestic market while Rs. 511 billion will be lent from foreign countries. Rs. 347 billion will be received as provincial cash surpluses.
For the repayment of foreign loans, Ishaq Dar asked for Rs. 286 billion in the upcoming financial year. The minister wants this amount to be loaned from abroad. Another Rs. 132 billion will be used to pay interest on foreign loans. Additionally, Rs. 39.7 billion have been requested to repay short-term foreign loans.