KARACHI: The debt and liabilities servicing rose by 149 per cent in the second quarter (October-December) of this fiscal year raising serious questions about the country’s deteriorating fiscal position.
The fiscal deficit for 2011-12 might exceed 7 per cent of GDP, which is highly unwanted by the donors as well as stakeholders of the economy.
The State Bank reported on Thursday that the government paid Rs924 billion in debt and liabilities servicing during the second quarter as against Rs363 billion paid in the first quarter of this fiscal year.
However, the most surprising element was huge payment on account of non-government external borrowing.
The principal repayment of external debt and liabilities was Rs697 billion in the second quarter. Out of this total, Rs661.8 billion was paid as principal repayment on account of non-government external borrowing.
The State Bank said the total debt and liabilities servicing accounted for 4.7 per cent of Gross Domestic Product in the second quarter while in the first quarter it was 1.9 per cent of GDP.The interest payments on both domestic and external debt rose substantially.
An amount of Rs186 billion was paid as interest on domestic debt in the October-December period while in the first quarter the amount was Rs165 billion. The interest payments on external debt also soared to Rs27.6 billion in the second quarter from Rs18 billion in the first quarter.
The State Bank report showed that the government had been paying interest on IMF loan. The government paid Rs4.3 billion and Rs3.8 billion for first and second quarter respectively.
In 2010-11, a total amount of Rs14.9 billion was paid to IMF in interest on debt. Pakistan will have to pay $1.1 billion in principal amount to IMF in the mid of this calendar year. Pakistan borrowed $8.9 billion from the IMF under the Standby Agreement.
The pressure on fiscal position led to massive government borrowings from the banking system which simply multiplied the debt servicing which again creates cash shortage.
The government is already short of liquidity since the economy is not generating revenues as per target while inflows from foreign countries have dried up.
The repayment of huge interest plus principal to banks and others like National Saving Schemes would force the government to continue borrowing from the commercial banks.
The State Bank reported that the country’s total debt jumped to Rs12.269 trillion in second quarter of 2011-12 from Rs11.849 billion in the first quarter.