ISLAMABAD         -      The Ministry of Finance has held the Covid-19 responsible for increasing debt to GDP ratio that has touched 87.2 percent of the GDP.

The State Bank of Pakistan (SBP) has released a latest data that showed the country’s total debt and liabilities had surged to Rs44.5 trillion, or 106.8 percent of gross domestic product (GDP). Pakistan’s total debt stood at Rs42.08 trillion by end of June 2020. The total liabilities stood at Rs2.476 trillion till June 2020, however, public debt to GDP ratio was equal to 87.2 percent of GDP by June this year. 

According to the SBP, the total public debt-to-GDP ratio has increased from 86.1 percent in June 2019 to 87.2 percent in June 2020. The ministry stated that this figure had actually gone down to around 84 percent in December 2019 which was on the back of strong growth in FBR (Federal Board of Revenue) taxes and strict control on current expenditure.

According to the ministry, 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-19 pandemic has adversely impacted the economy and slowed down the reforms program of the government. Pakistan’s economy suffered from Covid-19 outbreak through various channels like reduction in revenue and increase in expenditures, decline in domestic & global demand, lower tourism and business travel, trade & production linkages and supply disruptions. 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 the Covid-19 related expenditures, during last four months of FY20.

It is also pertinent to add here 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. 

The SBP data showed that Pakistan’s total debt and liabilities surged to Rs44.5 trillion. The PTI-led government increased total debt and liabilities to the tune of Rs14.7 trillion in last two years.

Pakistan’s total debt and liabilities stood at Rs29.8 trillion on June 2018. This debt and liabilities burden went up to Rs40.2 trillion by end of June 2019 and now it escalated to Rs44.5 trillion.

The PML-N increased debt and liabilities from Rs14 trillion to Rs29 trillion in last five years from Rs2013 to 2018. Pakistan’s total debt and liabilities stood at Rs6 trillion in 2006-7 and under PPP rule it increased from Rs6 trillion to Rs14 trillion from 2007-8 to 2012-13.