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The survey issued by Advisor to the Prime Minister on Economic Affairs Shaukat Tarin said the global environment plagued by the economic slowdown hampered non-debt creating inflows like foreign direct investment (FDI) and constricted the availability of the non-debt creating inflows.
Therefore the government had to resort to multilateral and bilateral sources for its financing requirements, thus adding to the stock of outstanding external debt. In relative terms, external debt liability (EDL) as percentage of GDP increased from 28.1 per cent at end-June 2008 to 30.2 per cent by end-March 2009 — an increase of 2.1 per cent. This is the highest ever rise in a single year for almost one decade.
On debt servicing during 2008-09, the economic survey said the annual debt servicing payments made during the period 1999-2000 to 2003-04 on average hovered around $5 billion per annum. Owing largely to a combination of the re-profiling of Paris Club bilateral debt on a long term horizon, the substantial write-off of the US bilateral debt stock, the prepayment of expensive debt and the relative shift in contracting new loans on concessional terms, this amount was drastically reduced to around $3 billion by 2007-08.
Debt inflows, though useful in supporting the country's balance of payments position and financing current account deficits, it says, also poses an obligation to make payments in the future, thus producing a strain on the economy.
As the debt burden of an economy rises, so do the obligations to make debt service payments. An amount of $3.65 billion has been paid during July- March 2008-09 which implies an increase of $650 million in one year.
Out of this amount, $2.83 billion was paid on account of repayment of principal amounts. A significant proportion of this increase is due to repayment of Eurobond amounting to $500 million made in February 2009 while $818 million were paid on account of interest payments. The amount rolled over increased from $1.2 billion in 2007-08 to $1.65 billion in July-March 2008-09.
The big chunk of
Out of the remaining amount 8.4 per cent of the debt is owed to the IMF which is a leap forward from last year's stake of 3.1 per cent of total EDL mainly due to disbursement of the first two trenches of the Stand By Arrangement (SBA). Private non-guaranteed debt contributes 6.6 per cent to the stock of EDL and another 4.3 per cent contribution came from foreign exchange liabilities.
The survey said the total outstanding public debt increased by Rs1.3 trillion in the first nine months of 2008-09 reaching a total outstanding amount of Rs7.2 trillion, an increase of 23.2 per cent in nominal terms. Total public debt has been growing at an average of 12 per cent per year since 1999-2000.
Similarly the total outstanding domestic debt is at Rs3.7 trillion, end March 2009 which implies net addition of Rs541.4 billion in the nine months of the current fiscal year. In relation to the GDP, the domestic debt stood at 28.7 per cent of GDP which is lower than end June 2008 level at 31.3 per cent.
The permanent debt stood at Rs660.4 billion at the end of March exhibiting an increase of Rs43.7 billion or 7.1 per cent up from the previous fiscal year. A large volume of the government's permanent debt originates from PIBs (Pakistan Investment Bond). The outstanding stock of PIBs stood at Rs411.6 billion at the end June 2008 and increased slightly by Rs9.7 billion.
In November 2008,
The composition of foreign economic assistance has considerably changed over the years from grants and grant-like assistance to hard-term loans.
The share of grants and grant-like foreign assistance in total commitments dropped from 80 per cent during the First Five Year Plan (1955-60) to nine per cent only during the year 2000-01. It, however, surged again to 20 per cent of total foreign aid contracted during 2001-02 but declined to 10.6 per cent in July-March 2008-09.
