Foreign Debt

How Pakistan can reduce foreign debt?

Suggest mechanism in Pakistan
economy to handle external
perspective of Pakistan economy.

Foreign Debt
An outstanding loan that one country owes to
another country or institutions within that
country. Foreign debt also includes due
payments to international organizations such as
the International Monetary Fund (IMF).

Pakistan External Debt

External Debt in Pakistan remained unchanged at 64338 USD
Million in the fourth quarter of 2014
External Debt in Pakistan is reported by the State Bank of
Pakistan.

 It is undisputed that external debt servicing remains the main

concern in the wake of unprecedented rise in the volume of
foreign loans since 2008 the major chunk comes from the
International Monetary Fund (IMF).
Paid $874 million in debt servicing to the IMF during the first
half of FY 2015

The real challenge in the coming years?

Maturity of 10-year Eurobonds

Issued in FY 2006 ($500 m) and
FY 2007 ($750 m),
due in FY 2016 and FY 2017.
the five-year Eurobond issued in April
2014 of $1 billion would mature in FY
2019.

 Managing high fiscal deficit (root cause of many economic ills)

coupled with massive debt burden is the toughest challenge
faced by our economic managers.
FY 2013-14 original target of FBR was required to collect
Rs2475 billion
[the target was first reduced to Rs2345 billion and then to
Rs2275 billion].
The FBR finally collected Rs2254.5.
The federal governments total revenues in budget 2013-14 were
estimated at Rs3420 billion,
out of which the share of provinces was Rs1502 billion at the
end they got only Rs1264 billion.
The federal expenditure under debt servicing estimated at

 After charging these four items, there

was revenue deficit of Rs1065.5 billion
meaning by, more borrowings!

IF THIS SITUATION PERSIST WHAT

WILL HAPPEN IN COMING YEARS?
In the coming years, the government will have to borrow
more, just to repay past loans.
The domestic debt will also increase as the government
has failed to broaden the tax base and reduce
expenditure.

THE BURGEONING FISCAL DEFICIT AND EVER-INCREASING DEBT

BURDEN ARE NOT ISOLATED PHENOMENA.
These are related to lack of political will to undertake ;
fundamental structural reforms,
enforce fiscal discipline,
crackdown on parallel economy,
abolish perks and benefits of the ruling elites,
eliminate wasteful expenses,
dismantle rent-seeking structures,
ensure the rule of law, and
stop reckless borrowing and ruthless spending.

OUR TAX POTENTIAL

Our tax potential at federal level alone is about Rs7
trillion.
According to Household Integrated Economic
Survey (HIES) 2011-12 conducted by Pakistan
Bureau of Statistics,
5 million individuals have annual taxable income of
Rs1.5 million.
If all of them file tax returns, income tax collection
from them at the prevalent tax rates will be Rs1650
billion

STOP THE LEAKAGES OF SALES TAX, FEDERAL

EXCISE AND CUSTOM DUTIES

Due to leakages in sales tax, federal excise and custom duties, the
total collection is not more than 50 per cent of actual potential.

The FBR in 2013-14 collected

Rs139 billion as federal excise and

Rs241billion as customs duties.

Collection under these heads should have been at least

billion. Target of Rs7 trillion is achievable provided the mighty
segments are taxed, tax machinery is overhauled, leakages are
plugged and all exemptions to the privileged classes are withdrawn.

Rs1002 billion as sales tax,

Rs2500

National Debt Conference

Top minds from Pakistan's economic community
gathered
The conference summed up Pakistan's debt
situation as 'precarious'
and
The speakers urged that business as usual is
not sustain-able for it may have disastrous
outcomes for Pakistan's economy going
forward.

Is Debt a bad thing?

Debt itself is

not necessarily a bad thing,

The point is its management that makes debt

either a productive

nuisance

tool or a

SO WHAT TO DO?

DEBT MANAGEMENT
Use of debt more accountable and tangible
Ensure that for the debt to be a useful instrument for
growth and development.
It has to yield at least one percent more return than the
borrowing cost and has to be measured tangibly.
Professionalization of debt management
Need for an improvement in systems and functions of an
independent Debt Management Office (DMO)

CONCLUSION
Collecting Rs7 trillion at federal
level can make Pakistan a selfreliant economy.
This is the only way to get rid of
debt prison.
Resource mobilisation should be
given priority to build
infrastructure, facilitate growth of

Mechanism to Handle External Perspectives of

Pak Economy
Reduce Govt Expenditure
Stable basis for Growth
Reduce Balance of Payments
Promote Export
Reduce Imports
Expanding Trade Basis
Implementation of RGST