October 21, 2020: The government's actual borrowing during last two years stood at $7.8 billion, the ministry of finance Wednesday clarified in response to a news item claimed that the government borrowing had increased by $17.6 billion.
According to the clarification issued by the ministry on Wednesday “Out of the total increase of $ 17.6 billion in external debt and liabilities during Jun 2018 -Jun 2020, $7.8 billion (44% of the increase) has been borrowed by the government for financing of its fiscal deficit and this amount was the actual borrowing of the present government during its first two years,”.
It said the report misquoted the total figures as all the external debt and liabilities were not the responsibility of the government itself.
The figure of increase in external debt and liabilities by $ 17 billion reported by SBP needs to be properly interpreted for a better understanding.
The figure of external debt and liabilities consists of four components: External Public Debt, Public Sector Entities’ (PSE) Debt, Foreign Exchange Liabilities of State Bank of Pakistan (SBP), and Private Sector’s External Debt.
The statement further explained that it is important to highlight that these additional borrowings were from multilateral and bilateral development partners whereas portion of loans from commercial sources were repaid.
Borrowings from multilateral and bilateral development partners were contracted on low cost and longer tenor, which contributed towards enhanced external public debt sustainability during the tenure of present government.
An amount of $4.8 billion (27% of the increase) is on account of SBP’s foreign exchange liabilities and it should not be interpreted as government’s debt because it is offset by cash balances and liquid assets of SBP.
Similarly $2.9 billion (16% of the increase) have 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.
While $2.2billion (13% of the increase) have been borrowed primarily by PSEs for spending on their financing needs mostly related to development expenditure.