Around 77% of the national budget was spent on servicing interest and repayment on loans

[Slog]

Link

Will Pakistan's economy survive the maturity of $50bn in debt this year?

Update: Feb 16, 2016 – In the Bloomberg report, calculations of Pakistan's total foreign debt ($120bn) and total budget for 2015-16 ($13tr) are incorrect due to which their assertions are questionable.

Despite improvement in the country's security situation and the economy growing at an eight-year high, Pakistan risks default as 42 percent of its foreign debt, around $50 billion, is due in 2016, reports Bloomberg.

Around $30 billion is due between July and September, of which $8.3 billion will need to be in foreign currency, depleting 40pc of the nation’s $21 billion in foreign-exchange holdings. But a major part of the debt due is in local currency, which leaves the government with room to introduce more short-term instruments to leverage its current liabilities.

“Pakistan’s high level of public debt, with a large portion financed through short-term instruments, does make the sovereign’s ability to meet their financing needs more sensitive to market conditions,” Mervyn Tang, lead analyst for Pakistan at Fitch Ratings Ltd., told Bloomberg.

In 2013, a $6.6 billion loan from the International Monetary Fund (IMF) was used to make payments for previous outstanding loans and avoid a Greece-like crisis. Since then, the projected debt due by end-2016 has grown by 79pc.

At Rs13 trillion ($124 billion), 77 pc of the budget is already allocated for loan repayments this year.

A concurrent challenge is meeting IMF demands to privatise state-owned concerns, as witnessed by the strike at Pakistan International Airlines, which ended only last week.

November 2015 saw new taxes worth Rs40 billion to meet the fiscal deficit.

In a Feb 1 statement, the Finance Ministry emphasised that Pakistan is committed to successfully implementing its IMF macroeconomic stability program, while the IMF is confident; mission chief Harald Finger said there is a “quite good” chance of implementing the guidelines provided.

Despite the grim outlook, experts are optimistic. According to Fitch’s Tang, Pakistan’s external liabilities are “relatively modest,” foreign-currency reserves have risen, the IMF is ready to help meet maturing loans and Chinese investment in an economic corridor is on its way.

“Improving growth prospects, lower inflation and smaller budget deficit should help to underpin investor confidence, particularly the domestic investor base,” Tang said.

Other risks include further capital flight and currency outflows, as well as devaluation of the rupee and fluctuations in the exchange rate. According to the IMF, the rupee is already overvalued at the current rate by as much as 20pc.

Mustafa Pasha, head of investments at Lakson Investments Ltd, which manages $200 million of stocks and bonds, told Bloomberg investors should expect volatility in bonds and pressure on the rupee this year.

Although the decrease in oil prices has helped, the future remains unclear.

For the 2016 financial year 77% of the national budget was spent on servicing interest and repayment on loans.

Scarcely believable...

 

[Bewal Express]

But it doesnt matter according to Nooras.

 

[WebGuru]

I guess Roshan Pakistan and Experienced Team at work again...

 

[WebGuru]

 

[Hamza_]

Ishaq Dar should be put to shame. Guy is incompetent and not good enough to run the economy and finances.

 

[DW44]

Source? If 77% was spent on debt servicing, that leaves behind 23% to be divvied up between khakis, healthcare, education, infrastructure and other spending programs. I can see the government compromising on most of those things but the khaki budget is sacred and I don't think it's ever been less than 25-30% of total government spending, often much higher but never lower and usually well clear of the 30% figure. Given it's been increasing rapidly in the last few years, it's hard to imagine its overall share of government spending falling unless tax collection as percentage of GDP grew a couple hundred percent between the previous fiscal year and this one.

 

[Slog]

Source? If 77% was spent on debt servicing, that leaves behind 23% to be divvied up between khakis, healthcare, education, infrastructure and other spending programs. I can see the government compromising on most of those things but the khaki budget is sacred and I don't think it's ever been less than 25-30% of total government spending, often much higher but never lower and usually well clear of the 30% figure. Given it's been increasing rapidly in the last few years, it's hard to imagine its overall share of government spending falling unless tax collection as percentage of GDP grew a couple hundred percent between the previous fiscal year and this one.

I read it in some research paper but a quick google search brings up this
http://www.dawn.com/news/1239706

 

[DW44]

I read it in some research paper but a quick google search brings up this
http://www.dawn.com/news/1239706

The article seems to say the same thing but it still seems a bit too much to be true. The khaki budget(defense+pensions spending) for 2015 is Rupees 959 billion (781+178 billion) or roughly 3.4% of GDP. Pakistan's total government spending tends to hover at around 19-20% of GDP and 77% of that plus 3.4% for the military leaves behind less than 1 percent of GDP for education, healthcare, infrastructure and other miscellaneous expenditures which is unrealistically low even for Pakistan.

 

[Couch Cricketer]

The article seems to say the same thing but it still seems a bit too much to be true. The khaki budget(defense+pensions spending) for 2015 is Rupees 959 billion (781+178 billion) or roughly 3.4% of GDP. Pakistan's total government spending tends to hover at around 19-20% of GDP and 77% of that plus 3.4% for the military leaves behind less than 1 percent of GDP for education, healthcare, infrastructure and other miscellaneous expenditures which is unrealistically low even for Pakistan.

That is how low it is sounds unbelievable that's what it is. Btw in the PMLN government has increased our foreign debt from around $60billion to around $72-4 billion which is an increase of around 20%. This is just the increase in foreign debt local debt increase is separate. Our tax to gdp ratio is bad as ever and our economy is not growing fast enough to keep up with the debt. Unless our economy starts growing at 10-15% or our tax to gdp ratio increases. The interest and loans repayments will keep getting bigger percentage of budget.
The actual debt is not bad as long as it is used to increase your economy/gdp as with the increase in gdp your tax collection will increase so you will need borrow less and maybe a few decades pay off your loans. But because of all the pocket lining done by our politicians and bureaucrats all the loans do not increase our gdp enough to be worth taking more debt.

 

[godzilla]

theyll make up the balance in the budget by more short term borrowing which will be extortionately expensive.

this is what happens when you have incompetent and/or corrupt people at the helm, dont tax the wealthy and allow them to take out their wealth from the country.

to be fair though, i dont kmow if it can be blamed entirely on the current government, debt and business cycles tend to last much longer than political cycles. the fault probably lies with this and the previous two or three governments too.

 

[godzilla]

here you go - the rich get richer:

http://tribune.com.pk/story/1240192...-na-panel-approves-tax-amnesty-realty-sector/

"ISLAMABAD: A National Assembly panel on Tuesday approved a blanket tax amnesty scheme for the realty sector to whiten an estimated Rs7 trillion of black money invested in the sector, despite stiff opposition by the Federal Board of Revenue (FBR)."

"The scheme will be seen as a defeat of the finance ministry that just five months back vowed to force people to pay their taxes on property transactions at fair market values. Instead of recovering taxes on fair market, the government is going to clean people’s black money. It will be third comprehensive amnesty package given by the PML-N government in past three years."

"However, the PML-N’s Mian Abdul Manan, Pervez Malik, Sheikh Fayazuddin, Sheikh Qaiser and MQM’s Rashid Godil strongly supported the scheme. After initially seeing opposition to the scheme, Mian Abdul Manan disclosed that the subcommittee that worked out the amnesty had been setup on “someone’s behest”."

"It is widely believed that Finance Minister Ishaq Dar decided to get parliament’s nod for the amnesty scheme after some influential PML-N legislators approached the prime minister for the concessional package."