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HomeMonetary PolicyThe Government adds $7.8 Billion to Debt, Liabilities in 2 Years

The Government adds $7.8 Billion to Debt, Liabilities in 2 Years

The finance ministry’s spokesperson on Wednesday said that over the two years, the government’s direct borrowing for funding its fiscal deficit amounted to $7.8 billion.

The spokesperson told the State Bank of Pakistan (SBP) that, between June 2018 and June 2020, the country’s external debt and liabilities increased by $17.6 billion.

“For a deeper understanding, the figure needs to be accurately interpreted,” the spokesperson said in a statement.

The number for external debt and liabilities consists of external government debt, debt of public sector organizations (PSE), SBP foreign exchange liabilities, and external debt of the private sector.

Out of the $17.6 billion overall rise in foreign debt and liabilities, the government borrowed $7.8 billion (44 percent of the rise) to fund its fiscal deficit. “This number was the new government’s actual borrowing during its first two years,” the spokesman said. “These additional loans came from multilateral and bilateral development partners, while loans from private sources were partially repaid.”

Low-cost and longer-term borrowings from multilateral and bilateral development partners were contracted, which led to improved external public debt sustainability during the current government’s tenure.

According to the Institute of International Finance (IFF), Pakistan is expected to post moderate growth over the current fiscal year as the widening fiscal deficit and rising debt pose risks to its economic outlook. The Washington-based Global Financial Institutions Association said that in FY2020/21, the economy could increase by 1.8%, led by a certain recovery in private consumption.

During the last fiscal year, growth contracted 0.7 percent, IFF said in its latest report. Domestic demand decreased by two percent, while goods and services exports increased by 1.6%, compared to a decrease of 7.3 percent in goods and services imports.

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