On Wednesday, A Senate panel asked the government’s strategy of taking new loans. The loan that has caused an exponential increase in borrowings as the cost of external debt servicing mounted to $4.8 billion in 11 months. This has almost doubled in the past four years.
According to the Ministry of Finance, From July through May of 2016-17, Pakistan spent $4.794 billion on repaying external loans and the interest on them.
This includes $3.6 billion in principal loan repayments and another $1.2 billion in interest payment. Once the full fiscal year data is available, the figure is expected to cross $5 billion.
The Ministry of Finance shared the data for 11 months of the last fiscal year. This ended on June 30 with the Senate Standing Committee on Finance.
Pakistan’s external debt rises faster than foreign currency earnings. The ministry did not provide a complete picture to the parliamentary panel. It also ducked questions on interest payment on short-term foreign borrowings.
Finance Secretary Shahid Mahmood requested an in-camera meeting to share details of the borrowings; these figures are already publicly available in the Ministry of Finance’s own publications.
Senator Saleem Mandviwalla asked that if there was any thought process behind the large borrowings. The finance secretary promised that in the next meeting the ministry would share details with the standing committee.
Mandviwalla said that the government was borrowing more to repay the previous debt. It could create serious problems for the economy. The finance ministry informed that Pakistan took $7.43 billion in external loans out of which $3.6 billion was consumed to retire previous loans. $3.8 billion was included in the total public sector debt stock of the country.
Pakistan returned $654 million worth of principal loan and another $49 million was paid in interest. Out of $2.9 billion in foreign commercial borrowings in July-May. $1.8 billion was paid back to multilateral lenders by the country. Bilateral lenders were paid back $1.2 billion in principal loans and $403 million in interest.
The senators expressed concern over the double-digit growth in public debt. In the 2017-18 budgets, the government has changed the public debt definition through Money Bill. Moody’s says Pakistan’s external debt will increase to $79 billion.
The finance ministry did not give a plan about how it will contain the debt. The finance secretary said was that the Federal Board of Revenue should improve its tax collection.
By the end of last fiscal year, he also discussed the declining foreign remittances that stood at $19.3 billion. The committee did not agree with his arguments on remittances.