Debt levels to remain high in next five years amid widening fiscal gaps, lawmakers informed.

Byline: Mubarak Zeb Khan

ISLAMABAD -- At a time when the debt levels are unsustainable and alarmingly high, the government on Friday revealed that it will borrow additional funds in the next five years owing to greater need for bridging the fiscal deficit and keeping it within the projected target.

Debt Office of Finance Division Director General Abdul Rehman Warraich shared these details after parliament asked the government to explain its five-year debt management plan, projected strategic targets of debt maturity and diversification.

Rehman informed the NA's Standing Committee on Finance, led by Asad Umar, that the government would borrow almost $22bn from external sources by end June 2020, which will increase total external public debt to around $98bn.

The government has projected to payback almost $8bn by June 2020. The DG also explained that medium-term debt strategy (MTDS) is focusing on projection, which the government believes that it can be achieved over the next five years.

The standing committee's members expressed their apprehensions with regard to the measures adopted in this regard.

Briefing the committee, the DG said that based on these flows; it was not possible for the government to meet all the strategic targets over the next five years owing to the fact that debt levels are very high. 'But, we will make significant progress to our strategic targets,' he added.

The Finance Division has made long- and medium-term projections for both domestic and external debt.

At the end of last fiscal year, domestic debt was 66pc of the total public debt while external debt was 34pc. The government has projected that, in the long run, the ratio of domestic debt will be raised to 70pc while that of external debt to be lowered to 30pc.

Govt aims to shift towards Shariah-compliant, bilateral borrowings

However, the DG said these targets might be unachievable due to rising financing needs. This ratio, he said, is going to be worse over the next five years. The external debt is going to be 41pc by the end of FY24 and domestic debt to be 59pc, he added. The change in these ratios depends on the economy's performance.

External debt

At the end of FY19, the multilateral/bilateral debt ratio was 73pc of the total external debt, while debt raised through Euro/Sukuk bonds issued in international capital market, constitutes 9pc and commercial bank loans make up for the remaining 18pc.

The DG claimed that the government would be able to significantly...