Committee to review foreign-funded plans: Reducing debt burden
By Ihtashamul Haque
ISLAMABAD, Aug 11: The government has decided to review major foreign-funded development projects worth around $10 billion with a view to reducing the country’s debt burden and ensuring its transparent usages.
Official sources told this correspondent that a five-member committee, headed by the prime minister’s advisor on finance, had been constituted to urgently review the projects and report to the president and the prime minister shortly. Other members of the committee are the secretaries of finance department, economic affairs division, Planning Commission and the director-general of the Debt Coordination Office.
The committee will review major foreign-funded ongoing projects and also those currently under process. It would evaluate whether the larger projects fitted into the country’s development priorities. And if they did not, could they be discontinued and their funding diverted towards more purposeful projects, said sources. Director-General Debt Coordination Office Dr Ashfaq Hasan Khan, when contacted, said that the purpose of the projects’ review was to further minimise the debt burden which was still very high.
“Pakistan is not a desperate borrower any more, but certainly there is a need to change our borrowing strategy,” he said and added that a decision had been taken that future borrowing should be need-based rather than donor-driven.
“Our borrowing should be consistent with the country’s macro economic framework and development priorities,” said Dr Khan who is also economic advisor to the ministry of finance.
Answering a question, he said Pakistan’s annual foreign borrowing, which used to be over $4 billion, had now been contained to around $2 billion.
“The president has told us in the last week’s meeting that foreign borrowing must make an impact on the lives of people and if that does not happen, we should not seek any loaning,” Dr Khan said.
Borrowing from domestic or external sources, he said, was a part of normal economic activity but its spending would have to be made more prudent to discourage ‘wrongdoings’.
“Debt is not bad but the burden of debt is bad,” he said, adding that as long as borrowing could offer higher economic and social returns than the cost of borrowed funds, the debt was not a burden.
He said a decision had been taken to increase debt carrying capacity. “Debt servicing problem arises when debt carrying capacity of a country does not increase commensurate with the increase in its debt servicing liabilities,” he added.
Debt carrying capacity, Dr Khan said, was defined as the ability of a country to service its external liabilities in an orderly and stable macroeconomic framework.
Pakistan’s external debt and liabilities, he pointed out, had declined by $1.24 billion - down from $37.9 billion at the end of 1990s to $36.62 billion by the end of March 2005. Dr Khan said Pakistan’s external debt and liabilities had been 22 times of its foreign exchange reserves in 1989-99 but had declined sharply to 2.8 times in just six years.
