ISLAMABAD: The Spokesman of the Finance Division Saturday categorically rejected a report carried by a section of press, “Dar’s Legacy: a heavily-indebted Pakistan” saying during last four years the national economy witnessed tremendous growth. In a statement, the spokesman said that in the past four years of the present government had seen tremendous economic growth whereby the size of the economy grew from USD 225 billion in 2013 to USD 304 billion in 2017 thus constituting an aggregate growth of 35 percent during the said period.
This was only made possible by the prudent policies of the government that included historically low domestic interest rates, a prolonged and sustained period of low inflation and price stability, significant surge in private sector credit, huge increase in PSDP spending and above all an effective monetary policy coupled with a judicious fiscal policy that saw the budget deficit come down from 8.2 % in 2013 to 5.8% in 2017.
Despite all these positive developments, some detractors habitually cherry pick the selective numbers and present them in isolation without giving the reader a proper perspective and a complete picture of the economy.
The news report said that Pakistan’s total debt and liabilities increased to Rs 25.1 trillion. It further stated that total external debt and liabilities has increased to roughly $83 billion by end of fiscal year 2016-17 and a sum of $8.2 billion was spent on external debt servicing. The report unduly criticized the changes made in Fiscal Responsibility and Debt Limitation Act, 2005. According to the spokesman, the report portrayed a negative picture of the economy by analyzing the debt in isolation and completely ignoring positive developments witnessed during the past few years.
The spokesman clarified that firstly, the writer has used exaggerated numbers which create doubts and mislead the general public.
The debt burden is better understood in comparison to its relation with the GDP instead of absolute debt numbers, he added. Another way to gauge the increase in public debt burden of the country is to compare that with relevant global debt statistics. In this regard, Pakistan witnessed a marginal increase of 1.4 percent (from 60.2 percent in 2013 to 61.6 percent in 2017) in its total debt to GDP ratio during last four years while during the same period, global debt to GDP ratio increased by about 8 percent (Source IMF World Economic Outlook).
Similarly, external public debt stood at US$ 62.5 billion while news report showed total external debt and liabilities number amounting US$ 82.7 billion at end June 2017 to sensationalize the issue.
The rationale of using external public debt instead of external debt and liabilities has been clarified at many forums, he maintained.
Total External Debt and Liabilities include the debt of other sectors (private sector, bank borrowing) which are not part of public debt since the government is not liable to pay these obligations.
The spokesman said the external public debt increased from US$ 48.1 billion to US$ 62.5 billion i.e. by US$ 14.4 billion while non-public debt rose by US$ 7.3 billion. Therefore, it is incorrect to assume that debt per capita is Rs.120,381.
He said the news report made a false claim that the government has made amendments in the Fiscal Responsibility and Debt Limitation (FRDL) Act, 2005 to conceal the worsening debt picture. In fact, most of the clauses of FRDL Act were outdated and the present government not only updated the clauses in accordance with the present economic realities but also defined path with an objective to improve the fiscal and debt situation of the country along with formalizing the definition of public debt.
It is important to note that these amendments were made regardless of the tenure of any political government to clearly define a debt reduction path.
Accordingly, the gross public debt numbers are consistent and unchanged as reported in the government publications in the past. Further, the total debt numbers are consistent with international reporting standards i.e. “IMF Public Sector Debt Statistics Guide for Compilers and Users (2013)”.