Pakistan’s borrowings are about 95 pc of its GDP: Report

Islamabad: Pakistan’s borrowings are about 95 per cent of the country’s GDP, which indicate the nation continues to lack a big financial boost and some support for debt servicing, reported local media.

The biggest portion of Pakistan’s annual budget goes to debt servicing, more than the amount reserved for defence spending, reported Geo News.

Pakistan’s Fiscal Responsibility and Debt Limitation Act, 2005 restricts the government not to cross the 60 per cent mark of the GDP.

The country’s external debt is around USD 122 billion, which, undoubtedly, because of its huge size and volume, requires a big financial boost and some support for debt servicing.

In the 2021-2022 budget, the total amount reserved for debt servicing was Rs 3,060 billion. On the other hand, the defence budget stood at Rs 1,370 billion. Another disturbing factor in debt management is circular debt in the power sector, currently standing at slightly over Rs2 trillion, according to Geo News.

The Pakistani publication further said that the main chunk of this circular debt is related to capacity payments, which can be categorised as bad management decisions made at the time of finalising agreements with independent power producers (IPPs).

But decision-makers should be given the benefit of the doubt. At that time, Pakistan faced a crisis-like situation as electricity was not available even for households and no resources were available for the government to invest in the power sector, it added.