Pakistan's public debt gets stable with adequate repayment capacity

It reflects strong growth in FBR taxes and strict control on current expenditure.

Pakistan’s public debt gets stable with adequate repayment capacity for the first time. According to the latest numbers released by State Bank of Pakistan the Total Public Debt-to-GDP ratio has increased from 86.1% in June 2019 to 87.2% in June 2020.

It is however important to note that this figure had actually gone down to around 84% in December 2019 which was on the back of strong growth in FBR taxes and strict control on current expenditure.

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According to Ministry of Finance, the prudent economic policies had resulted in posting of a Primary Surplus in February 2020 which was after a gap of many years. However, the COVID pandemic has adversely impacted the economy and slowed down the reforms program of the government.

Pakistan’s economy suffered from COVID-19 out break through various channels like reduction in revenue and increase in expenditures, declines in domestic & global demand, lower tourism and business travel, trade & production linkages and supply disruptions, etc.

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Resultantly, the Debt-to-GDP ratio has increased due to the sharp decline in growth and the increase in the budget deficit primarily, due to Covid-19 related expenditures, during last four months of FY20. It is also pertinent to add that the according to the Global Economic Prospects report published by the World Bank Group in June 2020, Pakistan economy has shown greater resilience than its peer in South Asia.

In view of the foregoing it is expected that the Government will be able to bring back the Debt-to-GDP ratio on a clear downward path over the medium term through increase in revenues and fiscal discipline. It is reiterated that the Government plans to run primary surplus, maintain low and stable inflation and promote measures that support higher long-term economic growth.