REVIEW OF PUBLIC DEBT IN PAKISTAN.

Byline: S. KAMAL HAYDER KAZMI

Analysis of Economic Survey FY2019 of Pakistan recorded that the main purpose of public debt management is to make sure that the government's financing needs are met at the lowest possible cost over the medium to long term, consistent with a prudent degree of risk. As a catalyst the debt may well act in the course of growth of an economy as long as the economic returns are higher than the cost of borrowed funds. Therefore, borrowed funds are bound to be correctly used and should conform to the country's debt repayment capacity.

Historically, the government officials also added that the high debt economies have efficiently responded with anextensive variety of policy approaches. A brief analysis suggests three primary lessons; First, a growth supporting policy mix is inevitable for debt reduction and fiscal consolidation. Second, fiscal consolidation must emphasize persistent structural reforms to public finances over temporary or short-lived fiscal measures.

Third, reducing public debt is bound to be time taking, particularly in the context of a weak external environment. It is also recorded that the government inherited extremely challenging macroeconomic condition marked by high fiscal deficits and debt levels. The condition was turned worse because of shortfall in foreign exchange reserves which contributed to a sharp devaluation of Pakistani Rupee and increasing inflationary pressures which led to a tight monetary policy stance and an important rise in domestic debt servicing cost.

Analysis of Survey also showed that over the medium term, the present government of Pakistan's objective is to bring and maintain its Public Debt-to-GDP and Debt Service-to-Revenue ratios to sustainable levels by a combination of greater revenue mobilization, rationalization of current expenditure and efficient/productive utilization of debt. The Government of Pakistan is committed to bring down Public Debt to GDP to 50 percent in fifteen years (2032/33) in accordance with the provision of Fiscal Responsibility and Debt Limitation Act.

According to a latest report of the State Bank of Pakistan (SBP), Prime Minister Imran Khan expressed a year ago to reduce public debt by half will remain unfulfilled as Government of Pakistan has added another approximately Rs6 trillion to the debt burden in just 1-year. The Central government's debt grew 21.3 percent to Rs33.4 trillion by the end of February as against to the same month of...