KARACHI, March 2: State Bank Governor Dr Ishrat Husain on Saturday said Pakistan, under its “strategy for external debt management (1999-2004)”, had reduced the net stock of debt over the last two years, besides building the foreign currency reserves gradually and moving on the path of substituting the expensive commercial borrowing with soft term loans.

In his keynote address at the 51st annual general meeting of Institute of Bankers of Pakistan here, Dr. Ishrat dispelled the impression that increase in the stock of debt was reflective of the borrowing trend of the government.

Finance Minister Shaukat Aziz was the chief guest at the AGM.

The SBP governor said: “We have built up our reserves slowly and gradually without any commercial borrowing, but by mopping up excess supply of foreign currencies available in the open market and now the inter-bank market.”

In the past, he said, reserves were built up mainly by borrowing commercially and thus adding to stock of debt, which in turn raised debt service obligations.

Explaining the reduction in the stock of debt, he said as of today, SBP’s reserves had reached $3.4 billion. “If our gross external debt and liabilities today are $37.8 billion, the net debt and liabilities are only $34.4 billion.”

“Comparing apples with apples our net external debt and liabilities have been reduced between October 1999 and March 2002 from $37 billion to $34.4 billion — a saving of $2.6 billion, he said.

“Imagine for a moment that if the currency revaluation of debt stock had not taken place our debt stock would have been less than $33 billion — a reduction of $4 billion in all.”

He said by June 2002, the gross stock expected to be around $36.2 billion and net stock will be slightly less than $33 billion. By end June 2004, the gross stock is expected to be around $35.2 billion and net stock will be $31 billion, mainly by gradually reducing foreign exchange liabilities.—APP