Govt forced to borrow for paying interest on past loans

Dec 14, 2020: Finance Ministry said Monday that the sole reason of forcing the government to borrow was the requirement to pay Rs.1 trillion in interest on past loans in just during the period from July to October.

This amount was on top of Rs 4.7 trillion already paid by this government prior to June, bringing the total amount of interest paid on past loans to a staggering Rs 5.7 trillion, the ministry said in a statement.

It clarified that the government had inherited a precarious debt situation which it managed with discipline, aggressive control of expenses and increase in tax and non-tax revenues.

The government efforts yielded primary surplus and only the payment of interest on past loans had forced the government to borrow at all, the statement added.

In the current fiscal year, the statement added, the government had succeeded in keeping the stock of public debt firmly in check with virtually no increase.

State Bank of Pakistan (SBP) data suggested a minimal increase in stock of about Rs 397 billion during the July-October period.

However, it added, this number did not include the adjustments of revaluation of the International Monetary Fund (IMF) loan, and the build-up of further cash buffers by the government, which if adjusted would make the estimates fairly similar.

Prudent debt management has included converting short-term into long-term debt and reducing the cost of the borrowings. The combined effects of these actions would contain any addition to the debt stock to a minimum, it concluded.

APP