ISLAMABAD: Public debt, as a percentage of Gross Domestic Product (GDP),decreased to 72 percent during the fiscal year 2021, from 76.6 percent inFY 2020, finance ministry said here Friday while rebutting an articlepublished in a section of press.
According to the latest published data, public debt to GDP is estimated tohave declined further to 67% of GDP as of December 2021, said a pressstatement issued by the finance ministry.
In real terms, the increase in public debt during the 2018-2022 period isaround 3.3% of GDP, which is less than the debt accumulated during 2013 to2018 period of 8.2% of GDP, it said.
The article on ‘Public debt soars by Rs18 trillion’ “published by ExpressTribune in its edition on April 6, 2022 is misleading and the author’scomparison of the 2008 to 2022 period fails to take into account thesignificant changes in the size of the economy,” the statement added.
It said, the economy’s capacity to take loans today was higher thancompared to previous years due to the significant increase in the size ofthe GDP. A better analysis would have focused on the public debt as apercentage of GDP, the standard indicator used by all internationalpublications.
According to the statement, Pakistan was one of the few countries thatmanaged to reduce its debt despite the significant impact of COVID onpublic finances.
Secondly, it added, the author needs to understand that the increase inoutstanding public debt does not necessary mean new borrowing by thegovernment.
The change in stock of outstanding public debt is primarily on account ofinterest payments on debt accumulated over the last 10 years, exchange raterevaluation of external debt, and cash balances maintained by thegovernment with the central bank.
These do not represent new borrowings as the author suggests in thepublished article.
New borrowing by the government during July 2018 to Feb 2022 is only Rs 5trillion – which is equivalent to the primary deficits run during thisperiod. The article wrongly attributes new borrowing at Rs 18 trillion.
The interest payments on debt accumulated over the last 10 years isestimated to be Rs 9 trillion during the last three and a half years. Theimpact of the exchange rate and the revaluation of the external debt isestimated around Rs 4.4 trillion. Whereas the government currentlymaintains cash balances of around Rs 0.6 trillion with the central bank tomeet emergency cash requirements.
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The new borrowing undertaken by the PTI led government of Rs 5 trillionover the last three and a half years has been used primarily for scaling upspending on the poorest households and welfare of the masses.
During the COVID crisis the government launched a record fiscal andmonetary stimulus package of Rs 2.5 trillion (6% of GDP or $ 16 billion)which focused on emergency cash assistance to 15 million families throughthe Prime Minister’s EHSAAS program, the largest ever social welfaretransfers in Pakistan’s history covering nearly 45% of the total population.
On top of this the government has provided free of cost vaccination to over127 million citizens against COVID.
“Our government has taken unprecedented relief measures to shield the mostvulnerable households during the current crisis with record highinternational commodity prices,” it added.
The government has reduced taxes on all petroleum products to 0% and frozenprices at the pump to shield consumers. As a result, the domestic consumersare paying Rs 150 / litre on petrol compared to Rs 187/ litre in Bangladeshand Rs 244/ litre in India.
Similarly, the low and middle income households have been provided reliefon their power consumption by a Rs 5 per unit reduction in their monthlybills. An estimated Rs 300bn relief has been provided to the masses toshield them from the rising international energy prices.
Prime Minister Imran Khan launched the Ehsaas ration scheme in March 2022to provide relief to over 20 million households (54% of total population)on purchase of essential food items including flour, pulses and cooking oil.
These 20mn households will receive these essential commodities at adiscount of 30% from the market prices. On top of these measures, thelandmark universal healthcare program Sehat Insaf card has been launched inPunjab and certain districts in Sindh and Balochistan in 2022.
More than 60% of all households in Pakistan will now get freehospitalization and healthcare, providing savings of Rs 10 lakh to eachcitizen.
