According to newspaper reports, the external debt of are reaching $79 billion by the end of fiscal year 2016-17 amid challenges of a fragile external payments position and growing political instability in the country. The government has planned to offload debt to GDP ratio by 50 percent in one and half decades, as gross public debt crossed over Rs 2 trillion and net public debt by Rs1.9 trillion this fiscal year. Experts hope the government will use its potential to bolster macroeconomic stability and will put the debt to GDP ratio on a downward trajectory in the years to come. The public debt is expected to be reduced by 60 percent of the GDP during the outgoing fiscal year and the Fiscal Responsibility and Debt Limitation (FRDL) Act has been amended by defining the ceiling for the budget deficit at four percent of the GDP. During first three quarters of the current fiscal year, the gross public debt has been recorded an increase of Rs 1.19 trillion. An increase in external debt has contributed Rs73 billion into the public debt. The financial managers reduced the average cost of gross public debt by 40 basis points during first six months of current fiscal year thanks to the implementation of the Medium Term Debt Management Strategy.
By issuing Sukuk bonds, the government also mobilized external inflows from various development partners during the first nine months of the current fiscal year. Reports suggest the government issued fresh guarantees of Rs 368 billion during first half of current fiscal year whereas average cost of domestic debt portfolio has been reduced by 50 basis points during the period. In fact, the government is beating about the bush to maintain fiscal stability by artificial arrangements. However, until it is able to generate money by stimulating industrial and agriculture sectors of the country, the makeshift arrangements would not work. The exports have been declining as persistent energy crisis are haunting the industry which is unable to produce export surplus. Burdening the country with debts will adversely affect the economic growth. The debt burden reached 66.5 percent of the gross domestic product from 63.5 in four years. Any debt management strategy to enhance debt servicing capacity will simply not work without the real growth in the industrial sector and that is the area of concern. It is hoped the government will do its best to settle the mess soon.
