ISLAMABAD: The Senate Standing Committee on Finance on Wednesday expressed concern over growing external and domestic debts of the country and demanded the Ministry of Finance to present a strategy for loan repayment.

The committee was discussing the debt position of the country up to May 2017 which stood at $58 billion for foreign loans, whereas the domestic debt was Rs12,956bn (Rs12.95 trillion) with an increase of Rs1.18tr over the previous fiscal year 2015-16.

The finance ministry officials said the external debt in 2015-16 was $57bn and there has been an increase of $3.8bn in 2016-17 (up to May).

“The figures are alarming and the government continues to take more amounts from local and foreign sources,” said committee chairman Senator Saleem Mandviwalla.

“Have you ever tried to devise any strategy for return of foreign and local debt?” he questioned the finance ministry officials.

Secretary Finance Shahid Mahmood said the main sources of cash inflow for Pakistan include tax collections by the Federal Board of Revenue (FBR) and foreign workers’ remittances.

The senators cited the two sources as adequate enough for loan repayment.

“The remittances have declined this year mainly due to the flawed foreign policy of the government,” said Senator Ilyas Bilour of the ANP.

Secretary Finance claimed that remittances from the Middle East declined due to low oil prices and from UK due to Brexit.

However, this did not convince the committee members who said the ministry should see the exports and home remittance figures of Bangladesh.

Senator Mohsin Aziz of the PTI noted that the Bangladeshi taka was stronger than the Pakistan rupee. Not only are the remittances higher but Bangladesh’s exports have topped $40bn, he added.

Regarding the rate of interest over various loans especially those obtained from China, the committee was requested for an in-camera briefing as rate of interest was a confidential matter.

However, Senator Mohsin Aziz said that total debt has increased by around 19 -20 per cent in one year.

However, the officials said the amount has reduced because many loans were in other currencies including yen, pound sterling, etc and their value against the dollar has dropped.

The committee members pointed out that this was a cosmetic effect as these currencies could become strong again anytime and the loans would rise.

The committee also expressed concerns over high domestic debt.

Due to excessive government borrowings, commercial banks in the country are less interested in lending to the private sector, the committee noted.

The committee directed the finance ministry to prepare a paper highlighting options for the repayment of debt. Depending on FBR collection only is not a viable option, the members opined.

“We need to consider various options – how to generate money in the next 5 or ten years,” Senator Mandviwala said.

Senator Mohsin Leghari pointed out that the FBR was holding huge amount of returns to maintain books but was also seeking advance tax from all sectors to meet its targets.

The FBR officials acknowledged that clearing the refunds of business community was essential to maintain the circle of sales tax as well as to enforce value added tax.

Member IR Operations Khawaja Tanvir informed the committee that the FBR was in the process of matching and reconciling tax refund figures with the business community and assured that refunds would be settled in near future.

Published in Dawn, July 20th, 2017