Govt Borrowed Rs 4.11 Trillion to Finance Budget Deficit in 15 Months


The federal government clarified on Sunday that it had borrowed Rs. 4.11 trillion in the last 15 months to finance budget deficit.

”The figure of increase in Total Debt and Liabilities by Rs. 11.61 trillion being reported in the media needs to be properly interpreted,” said a press release issued by the Ministry of Finance.

The press release stated that Finance Division lays the Debt Policy Statement and Fiscal Policy Statement every year before the National Assembly, to fulfill the requirements laid out under Section 6 and 7 of the Fiscal Responsibility and Debt Limitation Act 2005.

The recent statements cover the 15-month period including FY 2018-19 and first quarter of FY 2019-20 and contain all factual information with respect to debt and fiscal performance over the stated period.

The figure of Total Debt and Liabilities consists of the following five components:

  1. Total Public Debt
  2. Public Sector Entities’ (PSE) Debt
  3. Debt for Commodity Operations
  4. Foreign Exchange Liabilities of State Bank of Pakistan (SBP)
  5. Private Sector’s External Debt

Out of the total increase of Rs. 11.61 trillion in Total Debt and Liabilities during Jul 2018 – Sep 2019,

  • Rs. 3.54 trillion (31% of the increase) is due to currency depreciation which is a consequence of the misplaced exchange-rate, industrial, and trade policies of the previous government that led to large and unsustainable current account deficits and ultimately to sharp exchange rate adjustment;
  • As amount Rs 3.13 trillion (27% of the increase) is on account of cash balances and SBP’s foreign exchange liabilities. It should not be interpreted as Debt because it is offset by cash balances of government and liquid assets of SBP.
  • As amount Rs. 4.11 trillion (35% of the increase) has been borrowed for financing of fiscal deficit;
  • As amount Rs. 0.47 trillion (4% of the increase) has been borrowed by PSEs for spending on their financing needs;
  • As amount Rs. 0.08 trillion (-1% of the increase) has been retired on account of commodity operations which is a welcome development;
  • As amount Rs. 0.25 trillion (2% of the increase) is due to accounting adjustment due to difference in realized value and face value of long-term bonds issued during this period;
  • As amount Rs. 0.18 trillion (2% of the increase) has been borrowed by private sector from external sources which is a healthy sign indicating private sector’s capacity to borrow from abroad for domestic investments.

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