Hafeez Shaikh briefs cabinet today on hike in debt burden

ISLAMABAD: Advisor to Prime Minister on Finance and Revenues Dr Abdul Hafeez Shaikh is expected to present a detailed briefing to the federal cabinet on today (Tuesday) on reasons for rising debt and liabilities burden that escalated from Rs29.8 trillion in June 2018 to Rs44.5 trillion in June 2020.

The skyrocketing debt and liabilities burden went up by Rs14.7 trillion in the last two years under the PTI-led regime. The debt and liabilities had increased by around Rs15 trillion under PML-N regime in five years period from 2013 to 2018 as it went up from Rs14 to 29 trillion. Under PPP-led regime the total debt and liabilities increased by Rs8 trillion as it went up from Rs6 trillion in 2008 to Rs14 trillion in five years period.

The pace of accumulated debt burden made new records in last two years as it increased by Rs14.7 trillion in just two years. However, the PTI-led regime had successfully slowed down the pace of accumulation of debt and liabilities in second year of its rule in 2019-20. Now the debt managers believe that the pace of debt increase will be slowed down in years to come.

Hafeez Shaikh will brief the Cabinet about exact reasons that resulted into hiking the debt and liabilities burden in last two years. The total debt and liabilities in percentage of GDP stood at 106.8 percent of GDP and crossed psychological barrier of 100 percent of GDP. “The Advisor to PM on Finance will give extensive briefing to the cabinet to apprise them the debt and liabilities went up from Rs29.8 trillion to Rs40.2 trillion in first year rule during FY2019 and it increased to Rs44.5 trillion in FY 2020,” said the official sources.

The reasons for hiking the debt burden was devaluation of exchange rate and they would blame the previous government for ploughing seeds of macroeconomic instability where the current account deficit had ballooned to $20 billion. However, the monetary policy that had hiked to 13.25 percent also resulted into jumping up the debt servicing requirements so the debt accumulation accelerated because of increased fiscal deficit.

The debt data of the central government released by the SBP on Monday showed that the central government debt stood at Rs35.55 trillion in July 2020 against Rs32.798 trillion in July 2019. In June 2019 the central govt debt was standing at Rs31.7 trillion. The central government domestic debt escalated to Rs23.29 trillion in July 2020 as it stood at Rs22.01 trillion in July 2019.