This is with reference to a news item published in a section of press regarding the increase in external debt and liabilities of the country during the past two years. The figure of increase in External Debt and Liabilities by $ 17billion reported by SBP needs to be properly interpreted for a better understanding.
The figure of External Debt and Liabilities consists of the following four components:
1. External Public Debt
2. Public Sector Entities’ (PSE) Debt
3. Foreign Exchange Liabilities of State Bank of Pakistan (SBP)
4. Private Sector’s External Debt
Out of the total increase of $ 17.6 billion in External Debt and Liabilities during Jun 2018 -Jun 2020:
• $7.8billion (44% of the increase) has been borrowed by the Government for financing of its Fiscal Deficit. This amount of $ 7.8billion was the actual borrowing of the present Government during its first two years. It is important to highlight that these additional borrowings were from multilateral and bilateral development partners whereas portion of loans from commercial sources were repaid. Borrowings from multilateral and bilateral development partners were contracted on low cost and longer tenor, which contributed towards enhanced external public debt sustainability during the tenure of present government;
• $4.8billion (27% of the increase) is on account of SBP’s foreign exchange liabilities. It should not be interpreted as Government’s Debt because it is offset by cash balances and liquid assets of SBP;
• $2.9billion (16% of the increase) has been borrowed by private sector from external sources which is a healthy sign indicating private sector’s capacity to borrow from abroad for domestic investments;
• $2.2billion (13% of the increase) has been borrowed primarily by PSEs for spending on their financing needs mostly related to development expenditure.
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