The government is looking to borrow Rs. 1.9 trillion for financing its fiscal deficit from January to July 2020. This was disclosed to the National Assembly on Thursday.
In a written reply to a question by Muhammad Afzal Khokhar during question hour, the Minister for Finance and Revenue said that the domestic debt is Rs. 0.8 trillion and external debt is Rs. 1.1 trillion.
He said the government borrowing requirement is dictated by the gap between revenue and expenditure. He said that government borrowing is also required for resource-intensive infrastructure projects which facilitate economic growth and allow achieving social development goals.
In response to another question by Mr. Khokhar, the National Assembly was informed that the government intends to pay back Rs. 12,261 billion domestic and $28.2 billion external debt by the expiry of its term in 2023.
He further said that total debt and liabilities increased by Rs. 10.33 trillion during FY19. However, he said that it is important to highlight that total debt and liabilities include government debt as well as the borrowing of other sectors which is not the liability of the government of Pakistan such as the private sector, banks, foreign exchange liabilities, etc.
He said that although total debt and liabilities of the country had exceeded the size of GDP at end June 2019, however, it is important to mention that total public debt stood at 84.8 percent of GDP, thus remaining below 100 percent as observed at the start of the year 2000.
Break up of Increase in total public debt
- Rs. 3.44 trillion was for the financing of fiscal deficit
- Rs. 3.03 trillion was due to rupee depreciation
- Rs. 1.28 trillion was due to an increase in cash balances of the government and accounting policy relating to long-term bonds.
Hence, the actual borrowing of the government was Rs. 3.44 trillion during FY19, he said.
The minister said that the government inherited an extremely challenging macroeconomic situation marked by high fiscal deficits and debt levels. He said that the situation further exacerbated due to a decrease in foreign exchange reserves which contributed to a sharp devaluation of Pakistani Rupee and inflationary pressure which in-turn led to a tight monetary policy stance significantly increasing the debt levels and servicing cost.
Parliamentary Secretary for Finance Zain Qureshi told the house that inflation is being brought down as a result of a series of measures and these include not borrowing from the State Bank of Pakistan. He rejected the impression that the government is considering a mini-budget.
He said that the government is taking necessary steps to ensure fiscal discipline, stabilize economy and accelerate the growth. The process of revamping the economy through structural reforms and stabilizing measures such as broadening the tax base, reforming the public sector enterprises and reducing the fiscal deficit has been started, he added.