ISLAMABAD, Aug 23: The former PPP government during its five-year term took an unprecedented and staggering amount of Rs8.136 trillion in loans and the PML-N government has now decided to investigate how the money was spent and its repercussions on the national economy.
Ishaq Dar, the Federal Minister for Finance, Revenue and Economic Affairs Division, through a written answer, informed the National Assembly during the question-hour session on Friday that the former government regularly borrowed money throughout its tenure. The amount of loans kept on increasing with every passing year.
During the first year (2008-2009), the PPP government took loans amounting to Rs1.233 trillion, followed by Rs1.363 trillion, Rs1.566 trillion, Rs1.860 trillion, and Rs2.112 trillion in the last four years respectively. A major chunk of the money —Rs6.234 trillion —was obtained as domestic loans.
Responding to supplementary questions on behalf of Mr Dar, State Minister for Privatization Khurram Dastagir told the house that the government was studying details of the loans consumed by the previous government.
He said it was a tedious process which would take some time, but considering the amount of loans it was imperative to understand rationality behind such massive borrowings which the present and future governments had to live with.
In his address to the nation earlier this week, Prime Minister Nawaz Sharif had also lamented that over Rs14 trillion loans were adversely affecting the national economy because the government had to borrow money just to pay loans.
Explaining the reason behind borrowing, Mr Dastagir said the government financed its fiscal deficit through domestic and foreign loans. Fiscal deficit averaged around 7 per cent of the GDP over the past five years, resulting in high level of debt.
However, no loans were written off during the period. Particularly, domestic financing requirements of the government combined with the risk on part of banks have crowded out private sector credit availability. Moreover, increased spending on current expenditures, primarily on account of debt servicing and energy-related subsidies, left less resource allocation towards development expenditures which resulted in economic slowdown, the state minister said.
The government is committed to reducing the financing gap which will ultimately help reduce dependence on debt in future. The major steps include reduction of fiscal deficit and improving the balance of payments position through: revenue expansion by tax reforms focusing on broadening income tax base; austerity measures through reducing other than obligatory expenditures; reducing un-targeted subsidies; reforming public sector corporations; resolving energy crises; attracting non-debt creating flows -- remittances.
On another supplementary question regarding re-emergence of the circular debt, Mr Khan said that the primary reason behind accumulation of this menacing debt was difference between the production cost of electricity which at present hovered around Rs15 per unit and selling at Rs11 per unit.