ISLAMABAD: Public debt, as a percentage of Gross Domestic Product (GDP), decreased to 72 per cent during the fiscal year 2021, from 76.6 per cent in FY 2020, finance ministry said here Friday while rebutting an article published in a section of press.
According to the latest published data, public debt to GDP is estimated to have declined further to 67 per cent of GDP as of December 2021, said a press statement issued by the finance ministry.
In real terms, the increase in public debt during the 2018-2022 period is around 3.3 per cent of GDP, which is less than the debt accumulated during 2013 to 2018 period of 8.2 per cent of GDP, it said.
The article on ‘Public debt soars by Rs18 trillion’ “published by Express Tribune in its edition on April 6, 2022 is misleading and the author’s comparison of the 2008 to 2022 period fails to take into account the significant changes in the size of the economy,” the statement added.
It said, the economy’s capacity to take loans today was higher than compared to previous years due to the significant increase in the size of the GDP. A better analysis would have focused on the public debt as a percentage of GDP, the standard indicator used by all international publications.
According to the statement, Pakistan was one of the few countries that managed to reduce its debt despite the significant impact of Covid on public finances.
Secondly, it added, the author needs to understand that the increase in outstanding public debt does not necessary mean new borrowing by the government.
The change in stock of outstanding public debt is primarily on account of interest payments on debt accumulated over the last 10 years, exchange rate revaluation of external debt, and cash balances maintained by the government with the central bank.
These do not represent new borrowings as the author suggests in the published article.
New borrowing by the government during July 2018 to Feb 2022 is only Rs5 trillion – which is equivalent to the primary deficits run during this period. The article wrongly attributes new borrowing at Rs18 trillion.
The interest payments on debt accumulated over the last 10 years is estimated to be Rs9 trillion during the last three and a half years. The impact of the exchange rate and the revaluation of the external debt is estimated around Rs4.4 trillion. Whereas the government currently maintains cash balances of around Rs0.6 trillion with the central bank to meet emergency cash requirements.
The new borrowing undertaken by the PTI led government of Rs5 trillion over the last three and a half years has been used primarily for scaling up spending on the poorest households and welfare of the masses.
