Pakistan Pays Off Previous Govt’s $1 Billion Debt from 2016

The government has repaid $1 billion of foreign debt incurred in 2016 by issuing an international Sukuk at 5.5 percent, The Express Tribune reported.

According to officials of the Ministry of Finance, on Wednesday, the government settled a $1 billion debt that Pakistan had raised in October 2016.

The ministry is planning to borrow an additional $1 billion by floating a second international Sukuk, the officials added.

Meanwhile, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) wrote a letter to Finance Minister, Shaukat Tarin, asking him to inquire into the hike in interest rate two years ago.

State Bank of Pakistan raised its policy rate to 13.25 percent in 2019 amid high inflation and a widening fiscal deficit. The hike took place at the start of the International Monetary Fund’s (IMF) $6 million loan program.

The FPCCI said that the hike in interest rate was unfair and caused the business community to lose money.

“The decision to fix the interest rate at 13.25 percent diverted an additional Rs. 1.1 trillion of taxpayers’ money into banks annually, which is almost equal to our defence budget, increasing our debt servicing to Rs. 2.71 trillion in 2019-20,” the association said.

“A high-level inquiry should be conducted into the deliberate acts of debt mismanagement, which has cost the country’s taxpayers Rs. 2.5 trillion, and it is still draining fiscal resources,” it added.

The FPCCI further added that as the FBR had exceeded its quarterly tax collection target by Rs. 187 billion, the business community had expected a tax relief for the industry and the general public.

Pakistan and the IMF are currently conducting a review of the loan program. The IMF has asked the government to raise the revenue collection target for the current fiscal year by about Rs. 500 billion, which would further burden the industry and the people.

“It is disturbing for us to learn through press reports that the International Monetary Fund (IMF) has demanded imposition of taxes of Rs. 500 billion during the current financial year,” the FPCCI said.

The letter was co-signed by Younas Dagha, Chairman of Policy Advisory Board of the FPCCI, and Nasser Hayat Maggo, President of the FPCCI.