Chairman Pakistan Industrial and Traders Associations Front (PIAF), FaheemurRehmanSaigol has observed that persistent fiscal deficits and debt repayments have resulted in consistently high annual gross financing needs, averaging 27 percent of GDP over the past decade. This level was notably higher than the emerging market threshold of 15 percent. He said that the growing debt stock carries significant fiscal costs and exposes the country to debt vulnerabilities.
In a statement here on Sunday, he said that in the past two decades, Pakistan has witnessed two consecutive years of the highest budget deficits in 2022 and 2023. He pointed out that for the current fiscal year, a budget deficit of 7.7 percent of the GDP is anticipated, a staggering Rs1.3 trillion above the government’s target.
FaheemurRehmanSaigol expressed concerns over these persistent large budget shortfalls, which have led to the rapid accumulation of public debt. This, in turn, has crowded out private investment and contributed to macroeconomic volatility.
Referring to the SBP data, he unveiled an alarming 39 percent increase in the external debt of the federal government, reaching Rs24.2 trillion within a year. A substantial Rs6.7 trillion increase in external debt was primarily attributed to currency depreciation. As of Dec 2023, external debt stood at Rs17.4 trillion, excluding the International Monetary Fund’s liabilities.
Out of the total external public debt of $85.18 billion, the government owed $64 billion to multilateral and bilateral development partners including IMF which meant more than two-thirds of the total external public debt was on concessional terms with a longer maturity, 16pc from international capital markets and foreign commercial banks, and 7 percent of the total external public debt constitutes deposits from friendly countries like China and Saudi Arabia.
The PIAF leader said that this unsettling trend has raised concerns about fiscal sustainability and the adverse impacts of steep currency devaluation come at a time when the World Bank has cautioned Pakistan about the growing risks of its macroeconomic framework. For the past one and half year, the country is facing a serious financial crunch and continually relying on borrowing to meet its financial needs.
He said that high cost of doing business has proved to be dangerous for businesses, as ever-increasing cost of production is the real threat to the economy amidst frequent upward revisions in policy rate and continuous fluctuations in rupee against dollar.
The Piaf Chairman said that the government liquidity and external vulnerability risks are elevated and there remain considerable risks around to secure required financing to fully meet its needs for the next few years.—INP
