As the Pakistan People’s Party (PPP)-led government is set to announce its fourth budget on Friday, Pakistan’s stock of public debt stands at Rs 9.6 trillion, of which the domestic component accounts for 52 percent.
According to official documents available with Pakistan Today, Pakistan’s external debt and liabilities (EDL) stand at $58.4 billion. The documents say that the structure of Pakistan’s external debt has undergone considerable changes in the last decade: bilateral debt now accounts for 30 percent ($16.7 billion) whereas multilateral debt is 59 percent ($33 billion).
The multilateral debt, owed primarily to the International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB), can by law neither be written-off nor rescheduled. The entire stock of bilateral debt was rescheduled in December 2001 through Paris Club. The stock of debt had two components – Official Development Assistance (ODA) amounting to $8.8 billion and non-ODA, amounting to the remaining $3.7 billion.
The ODA component, with a weighted average interest rate of 2.3 percent, was rescheduled for 38 years, with a grace period of 15 years. The non-ODA component, with a weighted average interest rate of 4 percent, was rescheduled for 23 with a grace period of 5 years. Pakistan’s per capita income is over $1,000. The country’s bilateral debt was treated under the Houston Terms, whereas the HIPC Countries debt has been treated under the Naples Terms.
HIPC-MDRI countries include Rwanda, Malawi, Burkina Faso and Chad, among others who faced unsustainable debt burdens. The Finance Division feared that creditors could raise the observations as Pakistan was paying Rs 200 billion in subsidies to the power sector, which is twice as high as the interest payment on foreign debt. Pakistan is also providing Rs 245 billion from its budget to keep the bleeding public sector enterprises floating and is not taxing income originating from agriculture, which accounts for 22 percent of the Gross Domestic Product.
The Finance Division believes that these policies could have repercussions for Pakistan’s credit rating as well as the country’s ability to borrow from the World Bank, ADB and IMF, and raise funds from the international market.