KARACHI: The government paid Rs541 billion to service the domestic debt during the first half of this fiscal year, according to a recent report of the State Bank of Pakistan (SBP).
The amount was slightly higher than Rs534bn it paid during the same period of the preceding fiscal year.
The piling up of domestic debt is building pressure on the government to cut development expenditure. Most of the borrowing is being used to maintain lower fiscal deficit required under an agreement with the International Monetary Fund (IMF).
The SBP’s Monetary Policy Compendium for January 2016 did not report any improvement on the borrowing side or debt servicing.
Though the interest rate has fallen significantly compared to the first half of FY15, the massive government borrowings during first half of 2015-16 pushed up debt servicing.
The stock of government domestic debt increased by Rs685bn during the July-December period of this fiscla year, while that of total debt and liabilities rose by Rs864bn during first quarter of FY16, it said.
“Fiscal deficit was recorded at 1.1 per cent of GDP during the first quarter of FY16 compared to 1.2pc in the first quarter of FY15,” said the compendium. “In FY16 so far, government borrowing needs are entirely met from scheduled banks.”
Rising debt servicing continues to eat into government’s revenue — it paid Rs1.175 trillion during the previous fiscal year.
Since the revenue collection has failed to meet the targets set in the previous budgets, the government would continue to keep borrowing, which will again increase debt servicing.
Courtesy : Dawn News