ISLAMABAD: Pakistan’s external debt is projected to grow to a whopping $90 billion in the next four years and the country will need $20 billion a year just to meet its external financing requirements amid concerns that all constitutional arrangements put in place to manage debt have become ineffective.
The external debt figures compiled by renowned economist and the country’s former finance minister Dr Hafiz Pasha are about $14 billion higher than the projections made by the International Monetary Fund.
Moody’s report: International bonds weaken Pakistan’s debt affordability
Dr Pasha on Saturday shared his doomsday scenario in a National Debt Conference, arranged by the Policy Research Institute of Market Economy (PRIME) – an independent think tank.
Dr Pasha’s projections are based on official data. The $14 billion difference was mainly on account of foreign loans that will fly in to finance China Pakistan Economic Corridor (CPEC) projects. The government is not including CPEC loans in total public debt.
“At the moment, we do not have details about the loans that will be taken under the CPEC,” said Ehtesham Rashid, Director General of the Debt Office at the Ministry of Finance, while responding to these projections.
He said once details are available, the Office may have to re-do the entire debt management strategy.
There is enormous support for the CPEC in Pakistan but this game-changing corridor has financial implications for the country that have to be highlighted for better management of debt, said Dr Pasha. His comments come after State Bank of Pakistan governor Ashraf Wathra in an interview last week said there was a need to divulge more details on the debt and investment portions of CPEC, stressing the need for more transparency on part of the government. Dr Pasha said by 2018-19 amortisation payments would double to $8.3 billion. The current account deficit – the gap between external payments and receipts – will exponentially widen to 4% of the total size of the economy against this year’s level of just under 1% of GDP, he said.
Pakistan to get another $502m IMF loan
The current account deficit will widen due to import of machinery and plants for CPEC projects, in addition to imported fuel like Liquefied Natural Gas and coal. As against IMF’s projections of just $8.6 billion requirement, Dr Pasha said that total external financing needs, including bridging the current account deficit and repayment of loans, will alarmingly triple to $20 billion by 2018-19.
“This will push the total external debt to $90 billion by 2018-19, showing a growth of 38% over current volume of the foreign debt of over $65 billion,” said Dr Pasha.
He said Pakistan’s exports would have to improve to at least $36 billion if the alarming increase in debt was to be arrested. The country’s exports currently hover around the $24-billion mark.
Constitutional arrangements The constitutional arrangements put in place to better manage debt are not effectively working as there is hardly any serious debate in the Council of Common Interests and National Economic Council on the debt issue, said Abdul Wajid Rana, former Secretary Finance. He said the Debt Management Office has become subservient to Secretary Finance and was not autonomous.
Transparency Sakib Sherani, former Principal Economic Advisor to Ministry of Finance, said that the government was playing with debt numbers. His comments come after the government’s decision to exclude non-plan loans from public debt. He said the debt-to-GDP ratio has become irrelevant in case of Pakistan as the country lacks the capacity to repay the debt even at its current 65% level of debt-to-GDP ratio.
Pakistan agrees to slap billions in new taxes
“In case of Pakistan, the debt-to-revenue ratio is more relevant. 350% would be the limit, beyond which it wouldn’t be sustainable. Currently, this ratio stands at an alarming 523%,” said Sherani.
“By 2018-19, the debt-to-revenue ratio will be over 750%,” said Dr Pasha.
In order to ensure transparency, there must be a law requiring government to take parliamentary approval of any deal signed with the foreign governments and lending agencies, said Dr Kaiser Bengali, an economic consultant to government of Balochistan.
Published in The Express Tribune, December 13[SUP]th[/SUP], 2015.
The incumbent government contracted $26 billion loans in two and a half years against the previous government's $22 billion in five years, said former secretary Finance Abdul Wajid Rana. Rana said pubic debt was targeted to be 60 percent of the GDP by 2013; however, it is currently hovering around 64.6 percent as a percentage of GDP.
The revenue balance is deplorably below the target and it is still on the deficit side (-1.7 percent), said Rana while speaking at the National Debt Conference 2015 organized by Policy Research Institute of Market Economy (PRIME). However, the Finance Ministry said that it would not have any problem in upcoming foreign repayment as the government expects a significant amount of foreign inflows in coming years.
Ethesham Rashid DG Debt Ministry of Finance stated everyone is talking about the expected repayments on account of Paris Club rescheduling and repayment of bonds, etc, and no one is talking about the inflow the government expects in the next few years. Later, talking to Business Recorder, he said the shortfall in inflows and outflows would not exceed $3 billion in next five yeas. The government, he said has prepared a medium-term debt management strategy.
He said foreign debt is declining for the last five years because the government was unable to raise the targeted amount from external sources so it ventured into domestic resource. He further stated that for three years the government borrowing and debt strategy is in place and the office is working to bring the debt-to-GDP ratio closer to 60 percent benchmark as it started to increase after 2012. He said there is a difference between total debt and public debt and it should be ensured that when a figure of debt is reported it should be the figure of public debt as that is the liability of government and is currently at $51.3 billion.
Former Finance Minister Dr Hafiz A Pasha said that 2018 will be a critical year for Pakistan since most of the accrued debt is scheduled to be paid by then. He said if Pakistan is to successfully pay its debt by 2018, without the help of the IMF, it must increase its exports by 50 percent, ie, from $24 billion at present to $36 billion by 2018-19.
He also highlighted the implications of the CPEC on our debt liabilities post-2018; the CPEC liabilities: $11bn for highways, approx 75-80 percent of rest debt. He said debt to revenue ratio will reach 752 percent by 2018-19 up from its current level of 643 percent as of 2014-15. He explained that $6.5bn to $20bn is the external financing needed today and this would take our external debt to $90 billion.
He said that exports fell by 14 percent this year. Pasha warned that the real problem would start after 2016 when Paris Club rescheduling would expire, the repayment to the IMF of $6.64 billion under the Extended Fund Facility would commence, as well as the 5-year Eurobonds would mature.
The government must create fiscal space for increasing development spending to generate demand in the economy and get out of low growth phenomena in the country. Pasha said there is no likelihood of government taking another IMF programme from 2016 due to political consideration.
Dr Pasha said the potential of China Pakistan Economic Corridor (CPEC) is of a game changer with respect to energy and infrastructure projects and with respect to burst in investment and growth. After 2018, Pakistan growth rate is expected to jump by 2.5 percent as a result of investment in infrastructure and energy sector in CPEC. But the financial implications need to be worked out, Pasha maintained.
Advisor to chief minister Balochistan, Dr Kaiser Bengali said there is a need to raise the alarm because of latent danger that Pakistan will be forced to make distress sales of vital assets to foreign interests and to bend its security policies to suit foreign interests.
Bengali said that rising trade and fiscal deficits are the major reasons behind escalating public debt. Overall Tax-to-GDP ratio is 9.0 percent and during the last 7 years current expenditure (as a percentage total revenue) averaged around 117 percent. His calculations revealed that in the last one year exports declined by 13 percent and average trade deficit (from 2009-14) has reached $13.6 billion. He opined that, from 2013 to 2015, as a consequence of both these factors total debt has seen growth of 26.9 percent and external debt jumped up by 10 percent. He said from 2013 to 2015, Debt to GDP ratio averaged 69.5 percent.
He said Pakistan has missed significant numbers of quarterly review targets under the SDR 4,393 Extended Fund Facility but was given waivers. He said although Pakistan's economic indicators are miles away from that of Greece but are similar. "For now, there is no need to press the panic button; however, there is a need to raise the alarm.
He said that nature of FDI is problematic, instead of manufacturing; it is coming in to food chains and public schemes. He said that due to increasing import intensity imported (coal & LNG) and declining exports trade deficit is rising. He said that due to rising foreign ownership and profit remittance via FDI and privatization services deficit is rising. FDI in Pakistan is largely in services (frivolous sectors too). Companies earn their revenues in rupees and remit their profits in dollars.... there is a net outflow of dollars.
Economist Sakib Sherani said that 92 percent of the available credits were picked up by government and PSEs leaving only 8 percent credit for private sector in fiscal year 2015. He said that CPEC liabilities are around $11bn for highways, approx (75-80 percent of rest debt), but terms are unclear, who will contract debt, amount, repayment terms, who will ultimately pay.
Sherani said that Pakistan's public debt has increased sharply since 2007-08, while risk-profile has improved, dynamics still unfavourable in the absence of robust economic reform (tax, exports, energy, FDI) to constrain prospects. Sherani said the current debt-to-GDP ratio of 64 percent rose to 75.1 percent when additional liabilities of the government are taken into account. He also stated that whenever the debt-to-revenue ratio exceeds 200 percent it becomes unsustainable and in case of Pakistan this ratio stands at 523 percent of GDP. Commenting further, he said in 2018 this ratio is expected to increase to over 700 percent of revenues.
Congratulate then the nation for voting for these rulers. And why only cry on the foreign debt, what about the domestic debt which is now 5730 billion rupees and is increasing by 3 billion rupees a day. The day will soon come where government will have to print 2000 to 3000 billion rupees to pay back this internal debt. And then a USD will cost about 600 rupees and a piece of bread will cost 350 rupees.
"In order to ensure transparency, there must be a law requiring government to take parliamentary approval of any deal signed with the foreign governments and lending agencies, said Dr Kaiser Bengali, an economic consultant"
Its a stupid statement. The parliament is made of thugs and private servants of the ruling families. They will just sign whatever is asked to be signed.
Pakistans external debt is projected to grow to a whopping $90 billion in the next four years and the country will need $20 billion a year just to meet its external financing requirements amid concerns that all constitutional arrangements put in place to manage debt have become ineffective.
The external debt figures compiled by renowned economist and the countrys former finance minister Dr Hafiz Pasha are about $14 billion higher than the projections made by the International Monetary Fund. Moodys report: International bonds weaken Pakistans debt affordability Dr Pasha on Saturday shared his doomsday scenario in a National Debt Conference, arranged by the Policy Research Institute of Market Economy (PRIME) an independent think tank. Dr Pashas projections are based on official data. The $14 billion difference was mainly on account of foreign loans that will fly in to finance China Pakistan Economic Corridor (CPEC) projects. The government is not including CPEC loans in total public debt. At the moment, we do not have details about the loans that will be taken under the CPEC, said Ehtesham Rashid, Director General of the Debt Office at the Ministry of Finance, while responding to these projections. He said once details are available, the Office may have to re-do the entire debt management strategy. There is enormous support for the CPEC in Pakistan but this game-changing corridor has financial implications for the country that have to be highlighted for better management of debt, said Dr Pasha. His comments come after State Bank of Pakistan governor Ashraf Wathra in an interview last week said there was a need to divulge more details on the debt and investment portions of CPEC, stressing the need for more transparency on part of the government. Dr Pasha said by 2018-19 amortisation payments would double to $8.3 billion. The current account deficit the gap between external payments and receipts will exponentially widen to 4% of the total size of the economy against this years level of just under 1% of GDP, he said. Pakistan to get another $502m IMF loan The current account deficit will widen due to import of machinery and plants for CPEC projects, in addition to imported fuel like Liquefied Natural Gas and coal. As against IMFs projections of just $8.6 billion requirement, Dr Pasha said that total external financing needs, including bridging the current account deficit and repayment of loans, will alarmingly triple to $20 billion by 2018-19. This will push the total external debt to $90 billion by 2018-19, showing a growth of 38% over current volume of the foreign debt of over $65 billion, said Dr Pasha. He said Pakistans exports would have to improve to at least $36 billion if the alarming increase in debt was to be arrested. The countrys exports currently hover around the $24-billion mark. Constitutional arrangements The constitutional arrangements put in place to better manage debt are not effectively working as there is hardly any serious debate in the Council of Common Interests and National Economic Council on the debt issue, said Abdul Wajid Rana, former Secretary Finance. He said the Debt Management Office has become subservient to Secretary Finance and was not autonomous. Transparency Sakib Sherani, former Principal Economic Advisor to Ministry of Finance, said that the government was playing with debt numbers. His comments come after the governments decision to exclude non-plan loans from public debt. He said the debt-to-GDP ratio has become irrelevant in case of Pakistan as the country lacks the capacity to repay the debt even at its current 65% level of debt-to-GDP ratio. Pakistan agrees to slap billions in new taxes In case of Pakistan, the debt-to-revenue ratio is more relevant. 350% would be the limit, beyond which it wouldnt be sustainable. Currently, this ratio stands at an alarming 523%, said Sherani. By 2018-19, the debt-to-revenue ratio will be over 750%, said Dr Pasha. In order to ensure transparency, there must be a law requiring government to take parliamentary approval of any deal signed with the foreign governments and lending agencies, said Dr Kaiser Bengali, an economic consultant to government of Balochistan
th stagnant exports and continuously declining market share in the international arena, Pakistans textile industry is going through the worst patch in its history. The gap between Pakistan and its regional competitors has widened so much that now it looks unlikely that the country will ever catch up. The situation started deteriorating a decade ago but the stark disparity in exports became much more visible in the last five years. Value-added textile: Industry fears further drop in exports The story of Pakistans textile sector is not different from other major export-oriented industries of the country. The only difference is its sheer size in the countrys total exports that allows it to remain in the limelight. Other than securing the Generalised Scheme of Preferences (GSP) Plus status in the European Union (EU), textile exporters say this government has not done anything noticeable for the industry. The major difference is the attitude of our government and the governments of regional countries. The response time in Pakistan is too slow, commented Ziad Bashir, Executive Director of Gul Ahmed Textile Mills, one of the countrys largest composite textile mills. There is not a single major reason why Pakistan is lagging dramatically behind regional competitors. Problems like security challenges, energy shortages, high interest rates, lack of policy implementation and high utility prices have all contributed equally to the decline in textile exports, he added. Manufacturers gear up for Chinese interest Had the government failed in securing the GSP Plus status, textile exports would have been in a much worse situation, said Bashir. Pakistan got the GSP Plus facility in December 2013 that allowed it to export its products to the EU on reduced or zero duty. Regional comparison According to the World Trade Organisation (WTO), world trade in textiles and clothing increased to $766 billion in 2013 from $454 billion in 2004, a significant increase of 69% despite the fact that the world experienced one of the worst financial crises in 2008-09. Pakistans textile export share in the global market decreased from 2.2% in 2006 to just 1.8% in 2013. During the same period, Bangladeshs share jumped from 1.9% to 3.3%, Chinas share increased from 27% to 37% and Indias share improved from 3.4% to 4.7%, according to data compiled by the All Pakistan Textile Mills Association (Aptma). Textile sector dreading gas suspension Total exports of Pakistan in fiscal year 2014-15 were $23.6 billion, down 4.8% from $24.8 billion in fiscal year 2010-11. Similarly, textile exports have been hovering around $13 billion for the last five years. This shows a practical breakdown of Pakistans export-based industries, including the textile industry that contributes over 50% to total exports. Pakistan Apparel Forum Chairman Jawed Bilwani said he is certain textile exports will drop further. The government knows everything about the international and domestic challenges of the textile industry and yet it is not doing anything. Textile industry: Think tank outlines factors hitting competitiveness Pakistan is facing numerous economic problems but the prime minister has just met the exporters after assuming the office two and a half years ago, Bilwani said, adding this shows how serious the government is about arresting the dwindling exports. Global impact The economic slowdown in Europe and North America the two most important textile markets for Pakistan, India, Bangladesh and Sri Lanka has affected all the textile exporting nations of the region. However, the worst hit is Pakistan, indicating it has its own domestic problems that are contributing to low exports. It is not lack of innovation; it is the cost of doing business that has resulted in the decline in exports. Pakistan lagged behind in the region mainly because of its own domestic problems, Aptma Chairman Tariq Saud said when asked about the decline in textile exports in the last decade. We represent the entire textile industry: APTMA The cost of gas for the industry has jumped to $6.7 per million British thermal units (mmbtu) mainly due to the imposition of Gas Infrastructure Development Cess (GIDC). Gas price in India is $4.2 per mmbtu, $3.1 in Bangladesh and $4.2 in Vietnam. Pakistans electricity tariffs are also highest in the region. Average electricity prices in regional countries are in the range of 6-9 cents, but the price is 14.5 cents per unit in Pakistan, said Saud.
Re: Pakistan external debt set to grow to whopping $90 Billion- Debt Trap by Ishaq Dar
Brilliant-but dont worry as Patwarris & Zardaris will repay this. They borrowed and used it so stand responsible. The common man had nothing to do with this. Raheel Shareef should now focus on making sure that none of them leave Pakistan and freeze their assets
Noora will runaway to Jeddah/London
Zardari will runaway to Dubai
aor Patwari Haramzaadey Pakistan main hi apni **** marwain gey, inn beghairton ko phaansi laga deni chaiye jo iss Haramzaadey Noorey ko baar baar apni bund marwaney k liye ley kar aatey hain , sorry for my language, par Patwarion ki mentality dekh kar khoon kholta hai
