Dec 30 , 2015
NewsPakistan’s external debt comes down by $2 billion during Nawaz’s govt
By Mehtab HaiderISLAMABAD: Without any effort of economic wizards, Pakistan’s external debt against the Paris Club has declined by around $2 billion during the tenure of the PML-N government in the wake of fluctuations of Japanese Yen and European currency (Euro) against the US dollar, The News has learnt.
“If other currencies such as Japanese Yen and Europe’s Euro have remained flat in the last 27 months against dollar, Pakistan’s net increase in external debt might have touched over $6 billion against the existing increase of over $4 billion,” official sources confirmed on Tuesday.
This windfall gain has been achieved by the economic managers at a time when the economists are severely criticising the incumbent regime for piling up the external debt at an accelerated pace mainly because of decline in exports and slow pace of foreign investment.
A top official of the Finance Ministry said that the government had adopted a coordinated approach through improved external debt management, so now it was decided to book obligations against the outstanding amount by setting aside due amounts in US dollars, thus ensuring huge savings in the wake of fluctuation of other currencies against US dollars.
According to official data, the debt of Paris Club stood at $15.014 billion on June 30, 2012 which declined to $13.548 billion on June 30, 2013 when the PML-N regime took over the reins of power after winning the general elections.Now the Paris Club debt declined from $13.548 billion on June 30, 2013 to $11.737 billion on September 30, 2015, registering a decrease of $1.811 billion during the last 27 months.
“The exchange rate in terms of translational effect have provided free bonanza to the incumbent government,” former economic adviser to the Finance Ministry and renowned economist Dr Ashfaque H Khan told The News and added that his calculation showed that the external debt had increased by $8 billion but in the books the net increase stood at just over $4 billion mainly because of translational effect.
However, according to the State Bank of Pakistan (SBP) data, the country’s total foreign debt and liabilities stood at $66.457 billion on September 30, 2015 against $60.899 billion on June 30, 2013.
But the Finance Ministry argued that total external debt, which was obligated on government’s revenues, stood at over $51.8 billion while the private sector debt was hovering in the range of $15 billion, which had nothing to do with the payment on government’s revenues.
Finance Minister Ishaq Dar is claimed to have devised a comprehensive strategy to take parliament into confidence on what he called the “myth on external debt”, saying that the public debt, including the foreign debt, was under control and there was nothing to worry about.
But the projections made by renowned economists such as Dr Hafiz A Pasha and Dr Ashfaque H Khan are horrifying. Dr Ashfaque H Khan stated in his projections that the ongoing fiscal year (2015-16) is likely to end with $70 billion of EDL (External Debt and Liabilities) and projected to rise to over $85 billion by the end of the current regime’s tenure (2017-18) and further to $105 billion by 2019-20.
The burden of the external debt is projected to cross 300 percent of export earnings in the current fiscal year (2015-16) and expected to rise over 387 percent by 2019-20. With the rising external debt, the debt servicing is also projected to rise.
External debt servicing is expected to remain at last year’s level ($6.5 billion or 28.4 percent of exports) in 2015-16 but is projected to rise to $10 billion (37 percent of exports) by 2019-20, he concluded.
Courtesy www.thenews.com.pk