The International Monetary Fund (IMF) has projected Pakistan’s total debt to increase to 92.9 percent of GDP in 2021 compared to 92.8 percent of GDP in 2020.
IMF in its report “Second, third, fourth, and fifth reviews under the EFF and request for rephasing of access”, released on Thursday, noted that Pakistan’s total debt has increased by 2.1 percent of GDP in the fiscal year 2020 to 92.8 percent of GDP and is projected to decline from 92.9 percent of GDP at end of the fiscal year 2021.
The report has projected external debt at $114.841 billion for 2020-21, $122.831 billion for 2021-22 and $128.837 billion for 2022-23 of which external public debt is projected at $88.994 billion, $92.009 billion and 92.272 billion respectively. External debt is projected at 42.1 percent of GDP for 2020-21, 41.7 percent for 2021-22 and t 40.3 percent for 2022-23.
The debt sustainability analysis confirms that public debt remains sustainable with strong policies, but also points to risks from policy slippages and contingent liabilities. Pakistani authorities recognize that the elevated debt burden makes Pakistan susceptible to shocks, the report noted.
Debt is projected to enter a downward path with narrower twin deficits: public debt is forecast to fall toward 70 percent by the fiscal year 2026 and total external debt below 40 percent of GDP by the fiscal year 2024.
The report further noted that the government is in the process of amending the Fiscal Responsibility and Debt Limitation Act of 2005, in line with the recommendations of IMF and World Bank.
Pakistani authorities have stated that they are establishing a debt management office (DMO) to strengthen the debt management strategy. In line with World Bank and IMF recommendations, they have established the proper rules of business, describing the activities and organization of the DMO, as they are in the process of amending the Fiscal Responsibility and Debt Limitation Act (2005).
The Draft Bill for requisite amendments was submitted to the Federal Cabinet Committee on Disposal of Legislative Cases (CCLC) in February 2021 and is expected to be submitted to the National Assembly and the Senate for their approval by end-June 2021. In the interim, the Finance Division has assigned additional functions to the existing Debt Policy and Coordination Office and has approved an organogram that will allow them to hire additional staff commensurate with the responsibilities.
“We expect the setup of the front office/middle office/back office of the new DMO will be completed by end-June 2021 and we are committed to completing the recruitment of staff by end-September 2021 with some staff already being recruited by end-June 2021. Migration of relevant functions to DMO from other parts of government agencies will be completed by the end-December 2021. Moreover, we are enhancing cooperation with other government units, the Economic Affairs Division, in particular, to ensure accurate compilation and reporting of debt-related statistics, starting with the establishment of a new Working Group in February 2021”, the authorities insisted.