ISLAMABAD: The Finance Division here on Saturday categorically rejected a report appeared in a section of media, “Dar’s Legacy: a heavily-indebted Pakistan”.
The spokesman of the Finance Minister in his comment on the report said that the past four years of the present government have seen tremendous economic growth whereby
the size of the economy grew from USD 225 billion in 2013 to USD 304 billion in 2017 thus constituting an aggregate growth of 35 percent during the said period.
This was only made possible by the prudent policies of the government that included historically low domestic interest rates, a prolonged and sustained period of low inflation and price stability, significant surge in private sector credit, huge increase in PSDP spending and above all an effective monetary policy coupled with a judicious fiscal policy that saw the budget deficit come down from 8.2 % in 2013 to 5.8% in 2017. Despite all these positive development some detractors have made it a habit to cherry pick the selective numbers and present them in isolation without giving the reader a proper perspective and a complete picture of the economy, the spokesman said.
The report said that the Pakistan’s total debt and liabilities increased to Rs. 25.1 trillion. It further stated that total external debt and liabilities has increased to roughly $83 billion by end of fiscal year 2016-17 and a sum of $8.2 billion was spent on external debt servicing. The report unduly criticized the changes made in Fiscal Responsibility and Debt Limitation Act, 2005. The spokesman said the report has portrayed a negative picture of the economy by analyzing the debt in isolation and completely ignoring positive developments witnessed during the past few years.
The spokesman said that firstly, the writer has used exaggerated numbers which create doubts and mislead the general public. Some of these are highlighted as follows:
Total debt of the government stood at Rs.19.6 trillion at end June 2017 as opposed to Rs.25.1 trillion as mentioned in the news report. Further, the debt burden is better understood in comparison to its relation with the GDP instead of absolute debt numbers. Another way to gauge the increase in public debt burden of the country is to compare that with relevant global debt statistics.
In this regard, Pakistan witnessed a marginal increase of 1.4 percent (from 60.2 percent in 2013 to 61.6 percent in 2017) in its total debt to GDP ratio during last four years while during the same period global debt to GDP ratio increased by about 8 percent (Source IMF World Economic Outlook).
2. Similarly, external public debt stood at US$ 62.5 billion while news report reported total external debt and liabilities number amounting US$ 82.7 billion at end June 2017 to sensationalize the issue. The rationale of using external public debt instead of external debt and liabilities has been clarified at many forums. Total External Debt and Liabilities include the debt of other sectors (private sector, bank borrowing)which are not part of public debt since the government is not liable to pay these obligations. External public debt increased from US$ 48.1 billion to US$ 62.5 billion i.e. by US$ 14.4 billion while non-public debt rose by US$ 7.3 billion.
The spokesman said therefore,iIt is incorrect to assume that debt per capita is Rs.120,381.
He said the total debt numbers are consistent with international reporting standards i.e. “IMF Public Sector Debt Statistics Guide for Compilers and Users (2013)”. Such narration only intends to mislead the public regarding public debt data integrity based on lack of understanding of the public debt management, disregarding the Fiscal Responsibility and Debt Limitation Act approved by the parliament.
The news report incorrectly stated that the government is in violation of the original limit of 60 percent of Debt to GDP set under the Fiscal Responsibility and Debt Limitation Act passed by parliament in 2005. It is to clarify that the limit of 60 percent of Debt to GDP will be applicable by end June 2018 as per the Fiscal Responsibility and Debt Limitation Act. Therefore government is not presently in violation of this threshold of FRDLA. Furthermore the government, with an aim to improve debt sustainability, has introduced a 15 year debt reduction path whereby starting from 2018/19 the public debt to GDP ratio shall be brought down from 60% to 50% by end 2032/33.
The spokesman said the news report clearly ignores that Pakistan’s economic indicators are performing well which has been acknowledged internationally and led to an improvement in country’s credit rating.