Pakistan's debt surges by 40pc in 15 months.

Byline: Khaleeq Kiani

ISLAMABAD -- With around 40 per cent increase in Pakistan's public debt and liabilities in 15 months, the government on Friday conceded major violations of the Fiscal Responsibility and Debt Limitation Act (FRDLA) for massively exceeding debt acquisition limits.

In its debt policy statement laid before the parliament, the ministry of finance noted that total debt and liabilities that stood at Rs29.879 trillion at the end of the fiscal year 2018 crossed Rs41.489tr at the end of SeptemAber 2019, showing an increase of Rs11.6tr or 39pc.

At the end of the fiscal year 2019, the total debt and liabilities were reported to have increased by about 35pc or Rs10.344tr to touch Rs40.223tr.

Ramsha Jahangir

The report said the FRDLA required that the federal government take measures to reduce federal fiscal deficit and maintain total public debt within prudent limits thereof. As such, it was required to limit the federal fiscal deficit excluding foreign grants to 4pc of gross domestic product during the three years, beginning from the financial year 2018-19 and maintaining it at a maximum of three and a half per cent of the GDP thereafter.

'The federal fiscal deficit (excluding grants) was recorded at Rs3,635 billion or 9.4pc of GDP during FY 2018-19, thus, remaining higher than the threshold of four per cent,' said the debt policy statement.

In a statement laid before parliament, finance ministry admits to debt limit violations

The ministry, however, justified this due to a series of factors, most of them emanating from its policies. It said the one-off factors, which were not expected to carry over into FY 2019-20, contributed around 2.25pc of the GDP towards federal fiscal deficit. These included delay in renewing telecom licences, delay in sale of envisaged state assets and weaker than anticipated tax amnesty proceeds contributed around 1pc of the GDP. A shortfall in the transfer of State Bank profits contributed an additional 0.5pc of the GDP.

Profit of the State Bank of Pakistan (SBP) witnessed a steep decline during FY 2018-19 as the SBP incurred heavy exchange rate losses on its external liabilities. Payments of accrued interest on account of re-profiling of the SBP borrowing at end June 2019 also contributed 0.75pc of GDP in federal deficit.

In addition, the finance ministry said some other factors were beyond the control of the fiscal authorities, which contributed to higher than budgeted federal fiscal deficit during...