ISLAMABAD, Dec 11: Pakistan’s increased fiscal and current account deficits have resulted in an explosive accumulation of Rs3,000 billion public debt and over $43 billion external debt.

According to latest official projections firmed up and shared with the World Bank, IMF and the Paris Club creditors, it was increasingly becoming difficult to have any meaningful debt management, keeping in view the massive public and foreign debt that especially accumulated during the last 8 to 10 years.

The government, therefore, was seeking substantial debt relief, both from the bilateral creditors and International Financial Institutions (IFIs), to cope with what was termed an “alarming debt situation”, according to official sources.

Sources said the new staff report prepared by the IMF was favourable to help reduce the country’s debt, especially the most expensive and short-term one. “We owe about little over $2 billion most expensive and short-term foreign debt for which we are very seriously taking the issue with the international lenders concerned,” a top official said.

When contacted, he disagreed with the suggestion that this most expensive and short-term loan amounted to $8 billion, out of the total $43 billion debt. “If you do not believe us then wait for the release of IMF staff report to be shortly made public and have the correct figure,” he added.

The Paris Club creditors were meeting in Paris on Wednesday (Dec 12) to consider both debt rescheduling and debt re-profiling for Pakistan. After the approval of $1.3 billion Poverty Reduction Growth Facility by the Executive Board of the IMF last week, the Fund officials were reportedly inclined to offer debt re-profiling for Pakistan. This meant the writing off of loans to some considerable extent in order to help Pakistan improve its balance of payment position and help reduce the payment of debt servicing. For 2001-2002, the debt servicing payment amounted to Rs329.2 billion, out of the total budgetary outlay of Rs751.7 billion.

The government has sought $6 billion exceptional assistance from IFIs and about $4 billion debt rescheduling from the Paris Club that also included certain debt re-profiling. The assistance of $6 billion has been sought to return Pakistan’s $24 billion short-term loans during the next four-year period, sources said.

Officials conceded that a proposed Debt Policy Coordination office had not been set up in the ministry of finance to deal with the serious issue of both public and foreign debt. The Debt Reduction and Management Committee headed by Dr Pervez Hasan had proposed the establishment of the Coordination office.

Dr Pervez Committee believed that the stagnation in government revenues and exports during the last few years and the rising cost of government borrowing, both domestic and foreign, resulted during 1996-1999 in fastest growth in public debt burden in the country’s history. It said the small reduction in foreign exchange obligations was achieved only through freezing of individual foreign currency accounts.