ISLAMABAD: The cap on Pakistan’s public debt - currently at 60 percent of GDP - will be breached again by end of 2014, a World Bank (WB) report revealed yesterday.
“In line with the expectations of accelerating though moderate growth, near-double-digit inflation, and a lower but still large fiscal deficit for the ongoing fiscal year, the public debt-to-GDP ratio looks likely to be breached again in fiscal year 2014,” the WB predicted.
According to Pakistan Development Update report for 2014 released by the WB, public debt continues to exceed the cap of 60 percent GDP set by the Fiscal Responsibility and Debt Limitation Act for security reasons.
Over the last two years, the report says, the public debt to GDP ratio remained well above the threshold of 60 percent limit specified by the act 2005 Act.
“Large fiscal deficits and their monetary financing coupled with negligible foreign debt-creating flows fuelled this trend as well as the increasing share of domestic debt over the years” the WB states.
During the first half of FY14, the public debt-to-GDP ratio stood at about 58.9 percent. This is almost the same level as of December 2012.
Domestic debt creation has become increasingly skewed towards short-term instruments, primarily MRTBs. It increased to Rs10.2tr by end-December 2013, up by almost Rs1.9tr from Rs9.5tr at end-December 2012.
Floating debt constituted more than two-third of this addition. Within this category, central bank borrowing gained prominence despite the SBP Amendment Act 2012 being in place.
INTERNEWS
