Nawaz Sharif’s government and spree to obtain loans

Former Prime Minister of Pakistan Nawaz Sharif’s government obtained a whopping $35 billion in new loans during his four-year tenure to repay maturing debt and keep official foreign currency reserves

About $17 billion or nearly half of the total loans obtained from July 2013 to June 2017 were utilised to repay the previous debt

The government added net $18 billion to the country’s total external debt and liabilities – the highest amount added by any government during its tenure.

From July 2013 to June 2017, Pakistan’s total external debt grew by 30% to $79.2 billion, according to an International Monetary Fund (IMF) report. Out of this, external public debt was about $62.3 billion – also up by 28% compared with the figure four years ago, shows the IMF report.

The maximum number of loans – amounting to $10.1 billion, the highest taken out in any single year during the country’s 70-year history – was obtained during the last year of Nawaz’s government.

Starting from July 2013, with every passing year, the quantum of external debt kept growing due to the government’s inability to implement policies that could have ensured sufficient non-debt creating inflows.

On October 19, 2016, the director general debt at the finance ministry had informed the Senate Standing Committee on Finance that from July 2013 to June 2016, the PML-N government took $25 billion worth of fresh loans. He had said that net addition to external debt during the three-year period was $13 billion.

In 2013-14, the net increase in the external debt was roughly $3 billion. Similarly, in 2014-15, the net increase in debt was $4.42 billion, higher by 53% over the increase reported in the preceding year. There was a net addition of $5.6 billion in the country’s external debt during the fiscal year 2015-16, showing a growth of 28.2% over the increase in foreign debt in 2014-15, according to the ministry.

During the fiscal year 2016-17, the last government had borrowed $10.1 billion and out of which it returned about $5 billion loans.

The latest IMF report on Pakistan shows the country’s external debt at $79.2 billion by June 2017. It was $60.9 billion when the PML-N took the control of the government, according to the report. That means the government added $18.3 billion to the external debt.

In June 2013, the gross official reserves held by the State Bank of Pakistan stood at $6 billion, which increased to $16 billion by June 2017. The entire increase of $10 billion in the official foreign currency reserves was the result of borrowings, as during this period exports kept on declining.

The remaining $8 billion external debt was taken to meet the balance of payments requirements.

The IMF’s Article-IV report shows that Pakistan’s gross external debt in terms of exports was 193.2% in 2013; and this ratio deteriorated to 294.4% as of June 2017. During this period, Pakistan’s gross external financing requirements also almost doubled to $17.2 billion from $9.1 billion.