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Debt from domestic sources reaches Rs 10.82 trillion, external debt stands at Rs 4.71 trillion

Debt from domestic sources reaches Rs 10.82 trillion, external debt stands at Rs 4.71 trillion

ISLAMABAD: The Finance Ministry is following a comprehensive reform agenda to reduce dependence on foreign and domestic debt through domestic resource mobilization (DRM).

Pakistan’s outstanding debt has reached Rs 15.53 trillion up till March 2014, rising 7.4% from Rs14.46 trillion, according to the economists. Major chunk of the total debt comes from domestic sources, which have increased by Rs 1.30 trillion to R s10.82 trillion. External debt stock stood at Rs 4.71 trillion.

“DRM refers to the generation of savings from domestic resources and their allocation to economically and socially productive investments and such resource allocation can come from both the public and private sectors,” a well-placed official source at Finance Ministry told this scribe here the other day, saying that public sector used to do this through taxation and other forms of public revenue generation. Moreover, the source said that DRM was important because it was potentially the biggest source of long-term financing for sustainable development and it was the life blood of all state governance such as the provision of public goods and services.

“It can help strengthen fiscal institutions because stable and predictable revenue facilitates long-term fiscal planning which can help ensure that resources are allocated to priority sectors and are translated into outcomes,” the source observed, saying that coupled with economic growth was the antidote to long-term aid dependency and increased ownership and policy space to implement strategies that reflect development priorities.

The source added that DRM also ensured accountability of the government in provision of the terms of social contracts with the governed. “Comprehensive resource mobilization strategy with an aim to increase the tax to GDP ratio to 15% in the medium term focusing on broadening of tax base, removing anomalies in the taxation system improving the tax compliance and elimination of statutory regulatory orders (SROs) regime,” the source said.

“No economy can grow without generating foreign and domestic resource mobilization in an era of globalization,” the source said recalling that at the time the current government took charge of the affairs of the country, foreign reserves were at the lowest level due to heavy repayments made to the international financial institutions against the loans earlier obtained by the previous government, therefore, foreign inflows obtained for repayment purposes and to stabilise currency value.

However, the source said that Finance Ministry grid up lions to reduce dependence on foreign and domestic debt through domestic resource mobilization by following a comprehensive reform agenda. “In this regards Finance Ministry fixed the target to lower the deficit to 4.0% of the gross domestic product (GDP) through resource mobilisation to boost up the economy of the country.

The source observed that with an aim to contain deficit a farsighted expenditure management strategy was being followed. “With an objective to put the economy on sustainable growth and targeted to grow by over 8% between 2018 and 2025, the vision 2025 has been prepared,” the source said, adding that vision 2025, unveiled by Prime Minister Nawaz Sharif in August last year, had given 10 point agenda for adding 25,000 megawatt electricity into national grid till 2025 in order to overcome lingering crisis in the country.

“Vision 2025 aimed at ensuring uninterrupted access to affordable and clean energy for all sections of the population as government had envisaged 10 goals under Vision 2025” the source observed adding that size of Public Sector Development Programme (PSDP) allocation had been enhanced with a focus on public sector development in agriculture, industrial and services sector. Moreover the source said that National Power Policy 2013 had been developed to provide a road map for provision of affordable energy to resolve the energy crisis.

“Furthermore to revive of investors’ confidence in the sustainability of national economy to bring foreign direct investment (FDI) as well as to further strengthen the remittances through tapping large diaspora and effective Pakistan Remittance Initiative (PRI) which will also help in improving balance of payments (BOP) position as well as taking appropriate measures for enhancing the exports.

Recently, Pakistan and China has signed 19 agreements and memorandums of understanding (MoUs) mainly on projects relating to China-Pakistan Economic Corridor and electricity generation to further boost bilateral ties. The government’s resolve is to revive investor’s confidence and increase the investment to 20% of GDP over the medium term. Policy has been slashed to 9.5% from 10% to give boost to credit to private sector and it will create better prospects for investment climate.