ISLAMABAD: Finance Ministry is set to publish an updated Medium Term Debt Management Strategy for current fiscal year as well as for next three years.
This initiative is being taken just because of the fact that the macroeconomic realities have changed since 2012-13. The purpose is to ensure that both the level and rate of growth in public debt is fundamentally sustainable while meeting cost and risks objectives
Sources told Customs Today that Finance Ministry developed first Medium Term Debt Management Strategy (2013/14 – 2017/18) with the aim to lengthen the maturity profile of its domestic debt and mobilize the external inflows and an improvement was observed in most of the public debt sustainability indicators during last two fiscal years.
The source said that refinancing risk of the domestic debt reduced at the end of 2014-15 as indicated by percentage of domestic debt maturing in one year reduced to 47 percent compared with 64 percent at the end of 2012-13. Exposure to interest rate risk reduced as percentage of debt re-fixing in one year decreased to 40 percent at the end of 2014-15 as compared with 52 percent at the end of 2012-13.
Moreover, share of external loans maturing within one year was equal to around 28% of official liquid reserves at the end of 2014-15 as compared with around 69%t at the end of 2012-13 indicating improvement in foreign exchange stability and repayment capacity, source added.
“One of the objectives of Medium Term Debt Management Strategy (MTDS) was to facilitate the development of debt capital market” the source added saying that a well-developed debt market for long term investment was essential for the growth of economy as it provided additional avenues for raising funds besides providing investment opportunities to the investors.
Therefore, the source observed that in accordance with the commitment of the government to develop debt capital market, the government debt securities (T-bills, PIBs and Government Ijara Sukuk) are made available for trading at the stock exchanges.
The source said that developing countries like Pakistan hinged in a delicate balance as they needed to borrow in order to facilitate their development process. On the other hand borrowing should be utilized efficiently in view of their repayment capacity.
However, high and unsustainable level of debt plagues economic growth by lowering the development expenditure due to heavy debt servicing requirement.
“This intricate scenario calls for comprehensive and prudent debt management strategy which ensures the right choices among several options keeping in view cost and risk tradeoffs, addresses financial constraints and ensures intergenerational welfare impact” the source added
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