The cash-strapped government of Pakistan had dolled out over Rs 1.542 trillion of interest to its local and foreign debtors during the last fiscal year, FY13.
The huge mark-up, which is believed to be “haram” (forbidden) in Islam, constitutes 6.7 percent of the country’s gross domestic product (GDP).
The government of Pakistan repaid the said amount to re-service the country’s mammoth debts and liabilities that the State Bank of Pakistan (SBP) counted beyond Rs 17.25 trillion up to December 2013. This amount forms 70.5 percent of the country’s GDP.
Of the total, a break-up shows, Rs 16.62 trillion fall under the head of debts and Rs 627 billion as liabilities. The government’s domestic debts were calculated at Rs 10.22 trillion as against the loss-making Public Sector Enterprises that burdened the kitty with Rs 366 billion.
The country’s external debt, including Rs 379.4 billion from IMF, stood at Rs 6.029 trillion up to Dec 2013. The country’s liabilities can be broken up into Rs 246.1 billion external and Rs 381.2 billion domestic ones.
In FY12, the funds-starved country’s interest payment amounted to Rs 1.266 trillion, 6.3 percent of GDP, with its debts and liabilities totalling up to June 2012 at Rs 14.553 trillion. According to official numbers, the country repaid Rs 491.3 billion during second quarter of current financial year, Oct-DecFY14, compared to Rs 478.2 billion it repaid during July-SepFY14.
Last two quarters of FY13 saw the outflows of Rs 372 billion (April-JuneFY13) and Rs 375 billion (Jan-MarchFY13 on account of debt servicing. The payment of interest on debts while cost Rs 267 billion the liabilities drained another Rs 12 billion during the quarter in review.
While these increasing debt repayments remain a major drain on the heavily-indebted country’s exchequer, the principal amount cleared stands much lower than the interest paid. According to SBP figures, against Rs 491. 3 billion it paid as interest during Oct-DecFY14 Pakistan, the region’s third largest debt-recipient country, repaid Rs 212.5 billion as principal amount of its external debt and liabilities.
Needless to say that the cost of internal debt stands far higher than that coming from foreign bilateral and multi-lateral financers.
During 2QFY14, the central bank counted the country’s debt repayments to external lenders at Rs 27.5 billion as against Rs 239.2 billion it repaid to the local debtors, mostly the banks.
The present PML-N led elected government has added some extra billions to the resource-constrained country’s debt burden, a fact the critics say would plunge the terrorism-hit country into an unmanageable “debt trap”.
The country’s economic managers are, however, beating victory drum by declaring that the World Bank would be lending $15bn to Pakistan during next five years with other lenders like Asian Development Bank, Islamic Development Bank also having found the crises-hit country’s new rulers serious in meeting their conditions on economic reforms.
Finance Minister Ishaq Dar is reported to have said that by Sept this year the country’s previously-depleting dollar reserves would swell beyond $15 billion.