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Pakistan’s debt at ‘unsustainable’ levels, warns finance minister

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12 months ago

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  • Dr Shamshad Akhtar says economic revival package on the cards.
  • Says govt to restructure FBR to increase revenue to GDP ratio.
  • We are trying to bring a equitable taxation system, says minister.

ISLAMABAD: Caretaker Minister for Finance Dr Shamshad Akhtar while admitting debt had reached “unsustainable” levels shared that the government is in talks with the provinces to shift responsibility for Benazir Income Support Programme (BISP), hand over provincial PSDP projects and close down devolved departments for rationalising expenditures, reported The News on Friday.

“Pakistan’s public debt breached the limits of Fiscal Responsibility and Debt Limitation Act since 2013-14 and it has reached unsustainable levels. There is no good news on the debt burden as multilateral institutions did not permit the restructuring of external debt. The G-20 had granted Debt Service Suspension Initiative (DSSI) during the Covid-19 pandemic. So far Pakistan has undertaken a debt arrangement with China of $2.4 billion till 2024-25,” she said while addressing an SDPI conference in Islamabad on Thursday.

Shamshad addressed all the macroeconomic issues confronting Pakistan and said they were moving towards a democratic transition, and an “economic revival package” was on the cards to achieve self-reliance and ensure integration of the economy with regional countries.

She warned that the debt restructuring talks should be dealt very carefully as it will have repercussions. However, she made it clear that Pakistan does not plan to delay repayments of external debt. The larger fiscal deficit pushed up the debt burden, so the country was forced to breach the Fiscal Responsibility and Debt Limitation Act since 2013-14.

On the domestic debt front, she mentioned the government was moving on the path of re-profiling to move from short-term debt to long-term bonds of 3 to 10 years to reduce the cost of borrowing. However, on external debt, she said options were limited as 44% of overall public debt was in the shape of foreign loans.

Dr Shamshad said the government would restructure the Federal Board of Revenue to increase the revenue-to-GDP ratio from 9 to 15% in the first phase.

“We are trying to place a fair and equitable taxation system,” she said and assured that the tax base would be broadened. The customs policy and operation would be separated with the objective of facilitating trade and eradicate smuggling.

The finance czar said that the GDP growth rate would hover around 2% to 3% in the ongoing fiscal year. She added that the business and investors’ confidence had been restored.

Quoting a WB report, she said Pakistan’s size of economy could touch $2 trillion if the macroeconomic stability was ensured till 2047 from existing levels of $300 billion.

The Viability Gap Fund (VGF) would be established whereby a public-private partnership would be developed to execute development projects with the participation of the private sector. All departments devolved under the 18th Amendment would be abolished at the federal level.

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Business

Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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2 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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2 days ago

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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3 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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