ISLAMABAD, June 19: Pakistan’s public debt to GDP ratio, one of the economic indicators that show health of an economy, is expected to reach 59.3 per cent by the end of June 2012.

The office of Auditor General of Pakistan in its audit report for 2011-12 cautioned the government to be vigilant about the situation which has almost reached `crisis level’.

It warned that over 80 per cent of the debt crisis at the international level came at a debt-to-GDP ratio of less than 60 per cent.

Pakistan’s huge debt and liabilities reached Rs12.1 trillion in fiscal year 2011. As a result of this huge debt, public debt service (principal and interest payments) also consumed 43.7 per cent of the government revenue in the fiscal year 2011. In 2008, the public debt was just Rs6.055 trillion which doubled in the past four years.

At the same time, the public debt to government revenue ratio is also alarming, which is well above the level in the fiscal year 2007, before the onset of the economic downturn, the report said.

The Planning Commission of Pakistan in the annual report 2011-12 projected that the public debt to revenue ratio has reached 474 per cent. At the same time, it was reported that Pakistan public debt to GDP ratio in the past four years is hovering around 60 per cent.

The report observed that the Fiscal Responsibility and Debt Limitation Act of 2005 could not achieve the core objective of the law.

“Neither revenue deficit could be eliminated from economy, nor could the public debt be kept within prudent levels,” observed the AGP audit report.

Pakistan’s public finances, according to the report, are dominated by low and stagnant tax to GDP ratio, low development spending, and borrowing from banking system which resulted in hyperinflation, slow economic growth and widespread exchange losses in public debt portfolio.

The report observed that due to lack of serious measures in terms of governance, the economy is on the path of a downward spiral.

Except worker’s remittances, all other components of current account deteriorated during the second quarter of fiscal year 2012.

Slow economic and export growth, cuts on development spending, energy shortage, pressures on IMF loan repayments and the biggest challenge of financing the current account deficit puts the economy in ‘royal trouble’.

The report said that borrowing purposes, goals, strategies and mandatory reporting requirements of public debt management in Pakistan might be legally defined, and government should follow best internal practices of definition of public debt with its disclosure practices.

The audit report said that Pakistan with over Rs12 trillion of public debt did not have a well functional, professional and dedicated debt management office for looking after effective public debt management.

Appropriate debt management office may be revived, the report recommended.