ISLAMABAD - As the International Monetary Fund recently projected that Pakistan’s external debt would surge to $103.4 billion by June 2019; the government on Friday also conceded that the country’s debt would further increase in the coming years.

Pakistan’s debt would increase in the next few years along with exports and foreign direct investment in the country, said Adviser to Prime Minister on Finance Miftah Ismail at a press conference.

He further said that “Pakistan’s economy was growing faster than our debts; therefore we need not worry about it.” Pakistan’s external debt would increase due to widening of the current account deficit, he added.

In its post-programme monitoring report, the IMF has projected that Pakistan’s external debt would increase to $103.9 billion by June 2019 from estimated level of $93.3 billion of June 2018.

Miftah claimed that the next government would not face any difficulties to return the debt, as exports would show healthy growth in the years to come. “There is no need to worry about the increasing debts because overall debt-to-GDP rate is under control,” the adviser assured.

Miftah said that Pakistan’s foreign exchange reserves held by the State Bank of Pakistan were $12.2 billion, whereas the government would have to pay $3 billion under debt and interest payments before June this year.

He said that the government was considering several options to raise the amount, which would be paid for debt and interest payments.

The adviser said that government would focus on fixing high economic growth target, controlling inflation rate and setting ambitious revenue targets in the budget for the next fiscal year, which would be announced on April 27, 2018.

“This year the country’s economic growth will remain at around six per cent, while during [the] next year, the growth will rise further, which will help speed up the overall business activities,” he added.

Talking about incentives in the budget, Miftah said that the government would give relief to the people especially to the civil servants by increasing their salaries according to the inflation rate.

He said that the prime minister would decide about a tax amnesty scheme in a week's time.

Miftah said that the government could not afford to give huge subsidy on the products made by the Pakistan Steel Mills (PSM).

He said that the PSM was selling its products worth Rs850 million against the cost of Rs2 billion every month, when the mills was functioning, around two and half years ago. Similarly, the total number of employees in the PSM was 10 times higher than the international practice that was why it was running in losses, Miftah said. He added, "The steel mills could not pay its gas bills.”

Miftah recalled that the federal government offered the Sindh government to buy the PSM for one rupee but the provincial government rejected the offer.

He also termed his recent statement about selling the PSM for free to whosoever settles the PIA's losses as sarcasm.

The adviser said that the Economic Coordination Committee (ECC) had recently approved a plan to clear the circular debt.

The government will pay around Rs30 billion to the Independent Power Producers (IPPs), Gencos, Discos, nuclear power companies, and the Pakistan State Oil (PSO) from next week. The government will prefer to pay the IPPs on priority and they will be cleared within few weeks, he added.

“The government is reviewing the recommendations of the Financial Action Task Force (FATF) regarding measures to tackle money laundering and terrorism financing,” Miftah said, and added that an action plan in this regard would be ready by June this year. 

The government has also proposed to talk to China about a free trade agreement, in which country's local industry would be protected.

Pakistan would look for new markets in China to increase its export to the country, he said.

Miftah said that the concerns expressed by the IMF regarding the country's economy were correct, as we were already predicting higher current account deficit and external debt level.

The IMF has projected Pakistan economic growth at 5.5 per cent for the ongoing financial year as against our projection of six per cent, he remarked.

“If we achieved 5.5 per cent as projected by the IMF, it would be highest growth in last one decade,” Miftah said.

“The country is set to achieve history’s highest growth of six per cent and the lowest inflation rate, which show that the overall economy has turned around in the last five years,” the adviser said.

He defended the higher current account deficit, which had widened due to massive import of machinery for installing various energy industries of over 12,000 MW.