The finance ministry of Pakistan informed the National Assembly on 18th August that each Pakistani owes Rs95,000 in debt with the country’s foreign debt and liabilities standing at $58 billion – around Rs6.11 trillion.
Documents presented by the ministry to the parliament show that until December 31, 2016, the country’s domestic debt stands at Rs12.31 trillion or $117 billion.
The net public or combined debt comes to Rs18.44 trillion or Rs117 billion. As per these statistics, each Pakistani now owes Rs94,890.
The finance ministry’s documents show that between July 1, 2016 and March 31, 2017, the government borrowed Rs819.1 billion from banks.
It borrowed Rs734.62 billion of this amount from the State Bank of Pakistan and Rs84.50 billion from commercial banks.
Former prime minister 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 at a level which could give a sense of economic stability to investors.
About $17 billion or nearly half of the total loans obtained from July 2013 to June 2017 were utilised to repay the previous debt, shows statistics maintained by the finance ministry. 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.
In May 2017, Moody’s assessed Pakistan’s fiscal strength at negative “(-) Very Low”, which it said was hindering debt affordability and increases the debt burden. It said Pakistan’s limited tax base restricts its fiscal space, while low savings and shallow capital markets hinder stable domestic financing of sizeable budget deficits.
“Very Low (-)” score is below the indicative score of “Very Low”, which reflects that the material foreign currency portion of outstanding government debt (about 30% of total debt) exposes the government’s balance sheet to greater foreign exchange rate risks than currently captured by scorecard metrics,” it said.
According to Moody’s, the government’s debt burden has steadily increased in the past four years from 63.5% of GDP to 66.5%. “At 66.5% of GDP, the debt stock is higher than the 52.6% median for B-rated sovereigns and remains a constraint on Pakistan’s fiscal strength.”
“Approximate 30% of foreign currency debt does expose the sovereign (Pakistan) to marked changes in the cost of refinancing debt should the currency weaken abruptly,”
Debt affordability metrics, which include interest payments as a percentage of revenues and GDP, have been high in Pakistan relative to the median for B-rated sovereigns, which is a key constraint on the sovereign credit rating.
Moody’s has also assessed Pakistan’s susceptibility to event risk as “High,” driven by political risks and government liquidity risks stemming from high gross borrowing needs, due to the government’s large rollover requirements.
It said that large fiscal deficits and a reliance on short-term debt have contributed to very high gross borrowing requirements, which is a key rating constraint. At 32% of GDP, Pakistan’s gross borrowing need in 2017 is the largest among all rated sovereigns, after Egypt.