KARACHI, Aug 11: The rising balance of payment problem forced the government to make massive borrowings from the external sources during the last fiscal year, which was the highest in last six years.

The government’s external borrowings had pushed the country’s external debt by over $1.5 billion. The provisional figures issued by the State Bank on Friday showed that the external borrowings had gone up pushing the total foreign debt to $32.603 billion. The country’s external debt and liabilities had also gone up by $1.431 billion to $37.265 billion.

The rising external borrowings finally increased the external debt servicing payments and this would again put pressure on the country’s external account.

Pakistan paid $2.799 billion as external debt servicing during 2005-06 which would substantially increase during 2006-07 because of huge borrowings.

“This vicious cycle of borrowing and debt servicing has started for the last three years. The external debt account has been moving very slowly since 2001 to 2003,” said an analyst.

The pressure on external account had already touched peak with the record trade deficit of over $12 billion in 2005-06.

During last two years the government’s collective external borrowing was around $2.746 billion -- a substantial increase which is against the government’s claim that the debt burden is being reduced.

Analysts said that the expansionary budget would again compel the government to borrow from the external sources. They expressed concerns that the rising debt would again start chewing the nation’s earning in the form of debt servicing.

In the year 2004 the country had paid $4.969 billion in debt servicing.

“The debt servicing will again shoot up if the borrowing from external sources is not stopped and the country will again fall back into debt trap as happened in 1990s,” said Asim, an analyst. He said the nation paid huge cost of the high external debts.

The government has been arguing that cost of new borrowing is much lower than the previous ones and believes that the debt servicing will not rise to the 1990s level as no short-term expensive borrowing is being made.

Analysts said the government had failed in narrowing the rising trade gap and its efforts to boost the export had not been that successful as imports grew at the double rate than of export during the last fiscal year.

“A dangerous sign has appeared on external sector as the trade deficit has reached at par with the figure of the government’s foreign exchange reserves,” said Asim. The State Bank’s foreign exchange reserves stood $10.376 billion, which are enough for four months import.