KARACHI, Pakistan: Pakistan’s total debt and liabilities have skyrocketed to Rs29.861 trillion or 86.8 percent of GDP as of June 30, largely because of the last government’s failure to reform tax administration and weak expansionary fiscal policies.
According to the statistics released by the State Bank of Pakistan (SBP,) in the last five years, the country’s total debt and liabilities increased Rs13.5 trillion or 82.8% to stand at Rs29.9 trillion.
Five years ago, Pakistan’s total debt and liabilities were only Rs16.4 trillion.
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The rising debt and liabilities will be resulting into shrinking fiscal space for the government to meet requirements for all other important sectors as the debt servicing will now further eat up more resources collected on account of tax revenues in months and years ahead.
“The problem is too big which cannot be fixed without undertaking major adjustments. This monster cannot be resolved by getting loans as the government will have to reduce the yawning current account deficit by $7 to $8 billion to show its seriousness but the incoming government has not so far come up with solutions. They seem just relying on getting loans from friendly countries which will not solve our problems,” former minister for finance Dr Hafiz Pasha told Pakistani media outlet The News.
He said the country’s current account deficit stood at $18 billion in last fiscal year and with the status quo approach it might surge to $21 billion.
“We have no other options but to take bold steps to slash down the current account deficit by $7 to $8 billion by increasing cash margins on imports, slapping increased tariff and taking steps to boost exports,” he added. He said that there was need to decrease energy prices for export industries but so far no steps were taken by the government even after winning elections in July 26 polls.
One of the main reasons for the massive increase in the gross public debt was the PML-N government’s failure to contain expenditures and enhance tax-to-GDP ratio to a level that could have sustained the burden of additional expenditures.
Total debt and liabilities also include the public sector enterprises’ debt, non-governmental external debt, and inter-company external debt from direct investors abroad.