The Businessmen Panel of the Federation of Pakistan Chambers of Commerce & Industry has asked the government to take serious measures to get rid of its dependence on foreign loans, as country’s external debts and liabilities have increased by $543 million in the first quarter of this fiscal year while external debt servicing has soared to over $3 billion.
The BMP Chairman Mian Anjum Nisar said that Pakistan’s medium-term debt repayment capacity has been weakening due to government’s absolute dependence on loans. Due to the high external debts and liabilities stocks, its servicing has surged to a massive $3.07 billion in the first quarter of this fiscal year, showing an increase of 25.36 percent annually, he added. He warned that the government will have to borrow on large scale during the current year to meet the huge gap of current account deficit of about $20 billion, though it was reduced to $12 billion against the government target of $7 billion.
If the quarterly debt servicing maintains this trend and magnitude, overall FY20 figure could be around $12 billion, limiting the SBP reserves to $8.3 billion level. Mian Anjum Nisar, who is also presidential candidate for the FPCCI upcoming election, said that the government is mostly depending on non-tax revenue and borrowing to generate surplus budget, in an effort to minimize the budget deficit during current fiscal year.
The budget deficit had recorded at Rs476 billion in first quarter of the year 2019-20, which was Rs738 billion in corresponding period of previous financial year. He said that government had agreed with the IMF to bring down the primary deficit to only 0.6% of the GDP or Rs255 billion but this budget deficit touched the all-time high of Rs3.44 trillion (8.9 percent of the Gross Domestic Product) as the government failed to enhance tax collection and reduce expenditures despite announcing two mini budgets in last fiscal year and so-called austerity measures.
With a view to contain the current account deficit and improve foreign exchange reserves the government has now introduced import curbs which gave it some relief on the external front, he said and added that the same strategy has adversely impacted economic growth as decline in imports have hurt business activity in the country.
Quoting the data of the State Bank of Pakistan, he said the country’s external debts and liabilities rose to $106.89 billion by September end, as compared to $106.34 billion on Jun 30. According to the figures, external debts and liabilities as percentage of GDP fell to 38.3 percent as of Sept 30, versus 45 percent on June 30 while the debts and liabilities recorded a jump of $10.78 billion from $96.11b in Sept 2018.
The debt servicing amount comprises of long-term principal repayment worth $1.87b, short-term $402m and total interest of $798m.—INP