Pakistan has repaid $15.9 billion in debt servicing during the last six financial years, from 2005-06 to 2010-11, out of which $5 billion were incurred only as interest payments on the principal amount.
According to the documents exclusively available with Pakistan Today, during the fiscal year 2005-06, $1.44 billion was retired with an interest payment of $716.4 million, making a total debt servicing of $2.16 billion. In the fiscal year 2006-07, total debt servicing was over $2.02 billion, out of which $%1.2 billion was the principal amount while the interest payment was $822 million. In fiscal year 2007-08, total debt servicing was over $2.12 billion out of which $1.13 billion was the principal amount while the interest payment was $982.6 million.
During the first fiscal year of the incumbent government, ie 2008-09, total debt servicing was over $3.43 billion out of which $2.56 billion was the principal amount, while the interest payment was $872.9 million. In fiscal year 2009-10, total debt servicing was over $3.11 billion out of which $2.33 billion was the principal amount while the interest payment was $775.4 million. During the fiscal year 2010-11, total debt servicing was over $3.24 billion out of which $2.35 billion was the principal amount while the interest payment was $897.2 million.
The incumbent Pakistan People’s Party government has set a record by obtaining $14.8 billion in loans from various international financial institutions and other bilateral donors during March 25, 2008 to August 31, 2011. It has obtained loans of $3.9 billion from the Asian Development Bank, $3.3 billion from China, $2.6 billion from the World Bank and $1.2 billion from Islamic Development Bank and $1 billion from Japan. Pakistan’s close friend Saudi Arabia also provided loans of $644.9 million during that period.
The loans have varying interest rates of 0.6 percent to 3.8 percent with maturity period of two to 50 years. The loans have to be returned within a one- to 30-year period. The loans were obtained for power, infrastructure, commodity financing and for enhancing foreign exchange reserves.
According to the Economic Survey 2010-11, the external debt and liabilities increased from $37.9 billion at the end of June 2000 to $55.9 billion by the end of June 2010, and stood at $59.5 billion at the end of March 2011. Pakistan’s debt dynamics have undergone substantial changes in the last three years. Higher fiscal deficit led to accumulation of huge debt in absolute and relative terms. The debt profile moved towards shorter end of maturity because of desperation to finance deficit through domestic sources owing to inadequacy of external financing.
The survey says the excessive increase in debt has caused problems for Pakistan in the past, while imprudent domestic borrowing plagued the economy during 2010-11. Prudent and efficient debt management is required not only to ensure that present debt levels are kept under control, but also manage future repayment obligations, it says. Prudent debt management practices could not undermine the importance of prudent fiscal and monetary policy. Even best debt management may not by itself avert any upheaval in case of poor macroeconomic policy sequencing.