ISLAMABAD-The government has plan to bring the down the soaring debt-to-GDP ratio to 78 per cent in next few years by increasing revenue mobilisation, reduce expenditures and reform public sector enterprises (PSEs).
Pakistan’s debt-to-GDP ratio was recorded at 87.2 per cent at end June 2020, which was 86.1 percent at end June 2019, according to the official documents of the ministry of finance. However, the government has projected to bring it down to 78 per cent by 2024 due to several measures. “Over the medium term, government’s objective is to increase revenue mobilisation, reduce expenditures and reform public sector enterprises (PSEs). These measures are expected to bring stability leading to gradual reduction in the fiscal deficit over next few years and subsequently would reduce the country’s reliance on additional debt,” the documents said.
All these measures have already started to bear fruit and have helped the federal government to record a primary deficit of 2.4 percent of GDP during FY 2020 compared to 4.1 percent of GDP during FY 2019. This reduction in primary deficit was supported by enhanced revenue and rationalisation of non-interest expenditure. Over the medium term, public debt is expected to reduce to around 78 percent by fiscal year 2024. Debt to GDP ratio is currently around 87 percent in 2021, which would be reduced to 84 by 2022. Debt to GDP ratio would be brought down to 81 percent in 2023 and further reduced to 78 per cent of the GDP by 2024.
The government has said the internal and external debt increased in absolute terms primarily due to financing of the primary deficit, payment of interest on debts and devaluation of Pak Rupee against US dollar that resulted in increase in external debt value when translated into Pak rupees while the government borrowed to build its cash buffer to meet contingencies.
The ministry of finance in its latest report stated that Pakistan’s public debt was recorded at Rs36.9 trillion by the end of September 2020. The country’s public debt has surged to Rs36.9 trillion by September 2020, the ministry of finance’s Debt Policy Statement revealed. In total public debt, the domestic debt was recorded at Rs23.7 trillion and external debt at Rs13.2 trillion. The total public debt was recorded at Rs36.4 trillion at the end of June 2020, recording an increase of Rs3691 billion during the fiscal year 2019-20. The breakup of Rs3691 billion borrowing showed that the government had taken Rs982 billion debt for financing of primary deficit, Rs2620 billion for interest on debt and Rs399 billion against exchange rate devaluation effect.
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