Govt is Spending $10 Billion on Debt Payments: Ministry of Finance
The federal cabinet has been informed by the Ministry of Finance (MoF) that the present government is spending around $10 billion per annum for debt repayment compared to around $5.5 billion paid by the previous government.
The cabinet, which met with Prime Minister Imran Khan heading it, was given a detailed briefing about the country’s debt and their repayment during the fiscal years 2018, 2019, and 2020.
The meeting was informed that as the present government inherited a debt of Rs. 3 trillion, it had to take more loans for debt servicing and to save the country from default.
The cabinet was told that the present government had received $24 billion as foreign loans including the $2 billion taken during the interim government. It was informed that during the fiscal year 2019, the public debt registered an increase of Rs. 770 billion, mainly due to the restoration of the true value of the rupee.
The cabinet was told that the public exchequer had a hit of Rs. 100 billion in terms of revenue due to COVID-19, Rs. 210 billion were utilized in the repayment of previous governments’ debt, whereas Rs. 100 billion were reserved by the government as a cash buffer.
With an increase in public debt declining to Rs. 350 billion in 2020, the primary deficit decreased from Rs. 150 billion in 2019 to Rs. 100 billion in 2020. The cabinet was told that for the first time in the last 12 years, the primary surplus until March 2020 was Rs. 20 billion, before affected by COVID-19.
The meeting was told that the government had taken various measures during the last two years including securing a decline in primary deficit, stabilizing the exchange rate, improving the quality and nature of the domestic debt, improving the nature of the foreign debt, and introducing new products and other measures regarding loans.
The cabinet was told that the present government is focusing on the augmentation of the country’s exports and foreign exchange reserves.
About ongoing reforms in the energy sector, especially bringing down the circular debt, the cabinet was told that if the present government had not taken various measures, the annual circular debt which was Rs. 450 billion in the fiscal year 2018, would have swelled to Rs. 853 billion and Rs. 1,610 billion in the fiscal years 2020 and 2023, respectively.
It was informed that as a result of the government’s steps, the circular debt in 2020, which was projected to be Rs. 853 billion as per previous trends, was now being estimated at Rs. 538 billion, depicting a decrease of over Rs. 300 billion.
The cabinet was further told that various measures were taken by the government, including the negotiations with Independent Power Producers (IPPs), rationalization of return on equity cover, closure of low performing power plants, improvement in the subsidy system, and some others would help save Rs. 620 billion.
The meeting was also told that there was a continued decline in terms of Transmission and Distribution (T&D) losses, which were brought down to 17.7% in 2019 and would be further reduced to 16.3% in 2023.
The cabinet was informed that the government’s negotiations with Generation Companies (GENCOs) and agreements with the IPPs will help save the public money of Rs. 100 billion and Rs. 61.6 billion, respectively, over the next three years.
It was further told that as a result of various measures, an amount of Rs. 77 billion was saved in FY 2019.