KARACHI: The government of Pakistan’s total debt surged to Rs16.383 trillion as on December 31, 2014, a surge of 8.5 percent from Rs15.097 trillion as of December 31, 2013, central bank said on Friday.
This significant surge in a year suggests that government’s borrowing from domestic resources to reduce fiscal deficit continues.
“Due to the non-realization of planned external inflows and to meet the IMF target on government borrowing from the central bank, the government was compelled to rely more on commercial banks for deficit financing,” a banker said.
Government raised as much as Rs3.809 trillion through Pakistan Investment Bonds (PIBs) in 12 months, which took the federal government’s overall borrowing through various bonds to Rs4.137 trillion as of December 31, 2014.
Pakistan government’s domestic debt and liabilities surged by 13.06 percent to Rs11.89 trillion as of December 31, 2014 as against Rs10.516 trillion as on December 31, 2013 solely because of liquidity mopping through PIBs.
However, government’s short term floating debt was reduced by 24.73 percent to 4.418 trillion in the 12 months.
Borrowing through GoP Ijara Sukkuk (3-year) declined by 11.83 percent to Rs326.4 billion in the year under review.
An analyst said that government’s fiscal deficit was on higher levels i.e. 6-7 percent of GDP, which resulted in higher borrowings.
“Tax revenues are not being increased while government has not been able to cut subsidies, which is causing higher fiscal deficit,” he said and added that country received foreign inflows last year otherwise the government’s debt and liabilities could have been much higher.
Analyst suggested that government should focus on broadening increasing the tax net and enhancing direct tax collection to increase its revenues.
The central government’s total external debt declined by 0.12 percent to Rs4.752 trillion as on December 31, 2014 as against Rs4.758 trillion on December 31, 2013.
Central government’s external debt excludes IMF loans to State Bank for balance of payment support, foreign exchange liabilities and includes IMF loan for budgetary support.
Analysts said that higher borrowing from domestic banking system reflected that fiscal measurers taken by the PML-N government were not fruitful and the government was dependent on banks to meet its financial obligations.
The stocks of domestic debt and liabilities have reached new highs mainly due to higher fiscal deficit, shortfall in tax revenue collection and subsidies to power sector.
Government’s efforts to improve financing mix of budget deficit and lower its reliance on SBP borrowing also subdued credit off take by the private sector, analysts said.
According to SBP, total credit to private sector increased by Rs224.5 billion during first half of the current fiscal year; lower than the credit uptake of Rs325.8 billion during the same period last year.
“This slowdown in credit growth could be attributed to both demand and supply side issues such as weak corporate profitability of major industries till September 2014, government borrowings from commercial banks amid slower deposit growth, challenging security situation, falling commodity prices and continued energy/gas shortages for the industry. Moreover, heavy government borrowing from commercial banks have constrained their ability to lend to the private sector,” SBP said.

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