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Disaster!!! PML(N) government borrows 611 billion in first 40 days

AUz

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The prime minister, in his address to the nation, expressed his concern about the rising debt of the country. His concern was right because high and rising debt constitutes a serious threat to economic prosperity. It acts as a major impediment to growth and hence to employment generation and poverty alleviation. It also discourages both foreign and domestic investment and puts pressure on the exchange rate thereby causing sharp depreciation of the exchange rate and the attendant rise in public debt.



Managing the country’s debt is an art as well as a science. It requires proper institution to manage the debt. Successful debt reduction would require fiscal consolidation and a policy mix that supports growth. Key elements of this policy mix and measures include addressing structural weaknesses in the economy, domestic resource mobilisation and supportive monetary policy.



Fiscal consolidation must emphasise persistent structural reforms for resource mobilisation and expenditure rationalisation over temporary fiscal measures such as increasing tax rates and reducing expenditure across the board. Fiscal institutions including the country’s debt office can play an important role in locking any gains. Reducing public debt takes time; therefore, fiscal consolidation must focus on enduring structural change.



Pakistan’s public debt has grown over the last five years at a pace never witnessed in the country’s history. Public debt (both rupee and dollar components) has grown at an average rate of 21.5 percent per annum in the last five years (2008-12) as against an average rate of 6.6 percent per annum during the first seven years (2000-07) of the previous decade. In absolute terms, public debt rose from Rs6040 billion in 2007-08 to Rs14255 billion by the end of June 2013; that is, an addition of Rs8215 billion in five years.



It is interesting that successive governments over the last 60 years accumulated Rs6040 billion public debt while the previous regime alone added Rs8215 in just five years. Put differently, every child born in 2007-08 carried a debt burden of Rs36606. A child born in 2012-13 carried a debt of Rs77896 – an increase of 112 percent in just five years.



Within the public debt, it is domestic debt that has grown at a pace (23.4 percent per annum) faster than external debt, which stood at $46.2 billion in end June-2008 and rose to $66.4 billion by end-June 2011. But it declined to almost $60 billion in end-June 2013. The decline in external debt owes to the suspension of the IMF programme in May 2010 which dried up most of the external flows from the International Financial Institutions. Meantime, Pakistan continued to service its external debt obligations out of its foreign exchange reserves. It appears that the suspension of the IMF programme was a blessing in disguise as it prevented Pakistan from further accumulating external debt to the extent of approximately $10 billion by now.



Within the domestic debt, the composition of debt has witnessed considerable changes in the last five years. Medium-to-long term debt has been converted into short-term debt with serious consequences for government’s debt management. Today, over 55 percent of domestic debt (Rs5.2 trillion) is of short maturity, which must be rolled over at least once a year. Even more worrisome is the fact that the bulk of short-term debt is shifted to the shortest end of the maturity (three and six months).



Factors responsible for the unprecedented surge in debt include the persistence of large fiscal deficit (on average over 7 percent of GDP), sharp depreciation of exchange rate (over 40 percent) and slower growth in economy (on average, 3 percent per annum). The persistence of large fiscal deficit represents government’s inability to collect more revenues on the one hand and reckless spending on the other, resulting in an extraordinary surge in public debt. Higher public debt has caused interest payment to more than double, crowded out private investment and reduced fiscal space to undertake much needed public investment in infrastructure.



The prime minister’s concern is genuine. He has inherited a severely damaged economy. What is required on his part is not to repeat the same mistakes. Fiscal consolidation should therefore be the topmost priority of his government. In his frequent speeches, he loves to mention various developmental projects of national and regional importance that he intends to launch. All these projects would require resources to complete them. He has seldom talked about domestic resource mobilisation with same zeal and fervour. It is suggested that domestic resource mobilisation should be an integral part of his government’s fiscal consolidation.



Secondly, fiscal consolidation efforts need to be complimented by measures that support growth: structural issues need to be addressed and monetary conditions need to be as supportive as possible. The beginning is not up to the mark. The government has borrowed Rs611 billion in just 40 days from the State Bank of Pakistan as against Rs507 billion in full year (2012-13). In other words, it has borrowed Rs15.3 billion per day in 40 days as against Rs1.4 billion per day by the previous regime in 2012-13.



Thirdly, exchange rate stability is also vital for preventing public debt accumulation. The performance in this regard is equally poor. The exchange rate has already depreciated by 6 percent in just 80 days. Accordingly, without borrowing a single dollar, Pakistan has added Rs276 billion in public debt in just 80 days – Rs3.5 billion per day.



Nothing is lost thus far on economic front for this government. These are minor damages and can be cured. What is required from the government is a serious effort to consolidate the debt situation through fiscal discipline, productive use of fiscal deficit, improving the quality of expenditure, exchange rate stability, structural reforms, a vibrant debt office, good communication strategy, and a strong and coherent economic team.



The writer is the principal and dean of NUST Business School, Islamabad.

The Nation

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So, slaves of shareef family....start justifying...


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NOW!!!!!!! lets get to your job so that you can earn good money from 'Maryam Nawaz' ...:lol:
 
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Again he will ask Pakistanis abroad to save Pakistan and then what, it will remain the same or may be situation get worse, who knows may be he is going to open a subsidiary of his steel mill. Now where is nawaz supporters to explain this issue...
 
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Now thats impressive, taking out a selective choice from the whole article. Anyways, there is a very important sentence in the last line of the article
Nothing is lost thus far on economic front for this government. These are minor damages and can be cured. What is required from the government is a serious effort to consolidate the debt situation through fiscal discipline, productive use of fiscal deficit, improving the quality of expenditure, exchange rate stability, structural reforms, a vibrant debt office, good communication strategy, and a strong and coherent economic team.
That is the most crucial thing. When the federal budget is running a deficit of 1.6 Trillion, this means that around 1.6 trillion will be added to the national stock of debt by the end of fiscal year. However, how this deficit is employed, is the major issue. Around 150 billion out of this will be added to development expenditures, which is the productive use of deficit.Same goes for the 500 billion earmarked for circular debt (now released resulting in a jump of borrowing). Yet, around 1.2 trillion are to be used for debt servicing. Now that where the things aren't good. However, to avoid this in future, taxes will have to go up. Higher borrowing means more future taxes. We have spent 5 debt laden years, now unless taxes are not raised, debt will keep piling up. Public policy/fiscal economics 101.
 
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Sher ko vote diya ha abb sher ka kharcha be to bardasht kerna hain na. Pakistan na badla ha na badla ga or yahi chehra bar bar atta rahin ga.
Abb kuch he arsa main pakistani ko zadari government achi lagna lag perni ha. What an Irony
 
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560501_495739393853391_1500052310_n.jpg
 
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That is the most crucial thing. When the federal budget is running a deficit of 1.6 Trillion, this means that around 1.6 trillion will be added to the national stock of debt by the end of fiscal year. However, how this deficit is employed, is the major issue. Around 150 billion out of this will be added to development expenditures, which is the productive use of deficit.Same goes for the 500 billion earmarked for circular debt (now released resulting in a jump of borrowing). Yet, around 1.2 trillion are to be used for debt servicing. Now that where the things aren't good. However, to avoid this in future, taxes will have to go up. Higher borrowing means more future taxes. We have spent 5 debt laden years, now unless taxes are not raised, debt will keep piling up. Public policy/fiscal economics 101.

PML(N) taxed basic commodities in last budget, while big agriculturalists, super businessmen, and hyper property goons were not taxed..not to mention the increase in indirect taxation in last budget...

Absolute disaster for an economy like Pakistan...

Btw, how much Maryam Nawaz pay you for cheer leading her family-mafia owning Pakistan?
 
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actually i am surprised about ignorance of people..wasnt that obvious , why is it been made a news?
why did it happened simple..
they borrowed the money and thus in process took the budget deficit to 8% from 6% in first 30 days to put the PPPP mess in their books..the money borrowed was paid to the IPPs..
how do you thin 600 billion ruppes came from, simply browing from banks(2% of gdp=approx 450 billion ruppes)

so they put the blam on PPPP but took the credit them selves..thats amazing...
PPPP could have doen the same, but they wanted to put deficit down to 6%
why do you think he was so eager to finish the IPPs payment before 31 july, its because the fiscal year ends on 31 july

in nutshell PML N in future would say that they cleared the dues when infact it was cleared in PPPP final fiscal year final month..
so now they can blame PPPP for 8% deficit(which PML N caused by paying dues) and yet simultaneously claim the credit for paying out the IPPs!
 
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The prime minister, in his address to the nation, expressed his concern about the rising debt of the country. His concern was right because high and rising debt constitutes a serious threat to economic prosperity. It acts as a major impediment to growth and hence to employment generation and poverty alleviation. It also discourages both foreign and domestic investment and puts pressure on the exchange rate thereby causing sharp depreciation of the exchange rate and the attendant rise in public debt.



Managing the country’s debt is an art as well as a science. It requires proper institution to manage the debt. Successful debt reduction would require fiscal consolidation and a policy mix that supports growth. Key elements of this policy mix and measures include addressing structural weaknesses in the economy, domestic resource mobilisation and supportive monetary policy.



Fiscal consolidation must emphasise persistent structural reforms for resource mobilisation and expenditure rationalisation over temporary fiscal measures such as increasing tax rates and reducing expenditure across the board. Fiscal institutions including the country’s debt office can play an important role in locking any gains. Reducing public debt takes time; therefore, fiscal consolidation must focus on enduring structural change.



Pakistan’s public debt has grown over the last five years at a pace never witnessed in the country’s history. Public debt (both rupee and dollar components) has grown at an average rate of 21.5 percent per annum in the last five years (2008-12) as against an average rate of 6.6 percent per annum during the first seven years (2000-07) of the previous decade. In absolute terms, public debt rose from Rs6040 billion in 2007-08 to Rs14255 billion by the end of June 2013; that is, an addition of Rs8215 billion in five years.



It is interesting that successive governments over the last 60 years accumulated Rs6040 billion public debt while the previous regime alone added Rs8215 in just five years. Put differently, every child born in 2007-08 carried a debt burden of Rs36606. A child born in 2012-13 carried a debt of Rs77896 – an increase of 112 percent in just five years.



Within the public debt, it is domestic debt that has grown at a pace (23.4 percent per annum) faster than external debt, which stood at $46.2 billion in end June-2008 and rose to $66.4 billion by end-June 2011. But it declined to almost $60 billion in end-June 2013. The decline in external debt owes to the suspension of the IMF programme in May 2010 which dried up most of the external flows from the International Financial Institutions. Meantime, Pakistan continued to service its external debt obligations out of its foreign exchange reserves. It appears that the suspension of the IMF programme was a blessing in disguise as it prevented Pakistan from further accumulating external debt to the extent of approximately $10 billion by now.



Within the domestic debt, the composition of debt has witnessed considerable changes in the last five years. Medium-to-long term debt has been converted into short-term debt with serious consequences for government’s debt management. Today, over 55 percent of domestic debt (Rs5.2 trillion) is of short maturity, which must be rolled over at least once a year. Even more worrisome is the fact that the bulk of short-term debt is shifted to the shortest end of the maturity (three and six months).



Factors responsible for the unprecedented surge in debt include the persistence of large fiscal deficit (on average over 7 percent of GDP), sharp depreciation of exchange rate (over 40 percent) and slower growth in economy (on average, 3 percent per annum). The persistence of large fiscal deficit represents government’s inability to collect more revenues on the one hand and reckless spending on the other, resulting in an extraordinary surge in public debt. Higher public debt has caused interest payment to more than double, crowded out private investment and reduced fiscal space to undertake much needed public investment in infrastructure.



The prime minister’s concern is genuine. He has inherited a severely damaged economy. What is required on his part is not to repeat the same mistakes. Fiscal consolidation should therefore be the topmost priority of his government. In his frequent speeches, he loves to mention various developmental projects of national and regional importance that he intends to launch. All these projects would require resources to complete them. He has seldom talked about domestic resource mobilisation with same zeal and fervour. It is suggested that domestic resource mobilisation should be an integral part of his government’s fiscal consolidation.



Secondly, fiscal consolidation efforts need to be complimented by measures that support growth: structural issues need to be addressed and monetary conditions need to be as supportive as possible. The beginning is not up to the mark. The government has borrowed Rs611 billion in just 40 days from the State Bank of Pakistan as against Rs507 billion in full year (2012-13). In other words, it has borrowed Rs15.3 billion per day in 40 days as against Rs1.4 billion per day by the previous regime in 2012-13.



Thirdly, exchange rate stability is also vital for preventing public debt accumulation. The performance in this regard is equally poor. The exchange rate has already depreciated by 6 percent in just 80 days. Accordingly, without borrowing a single dollar, Pakistan has added Rs276 billion in public debt in just 80 days – Rs3.5 billion per day.



Nothing is lost thus far on economic front for this government. These are minor damages and can be cured. What is required from the government is a serious effort to consolidate the debt situation through fiscal discipline, productive use of fiscal deficit, improving the quality of expenditure, exchange rate stability, structural reforms, a vibrant debt office, good communication strategy, and a strong and coherent economic team.



The writer is the principal and dean of NUST Business School, Islamabad.

The Nation

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So, slaves of shareef family....start justifying...


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NOW!!!!!!! lets get to your job so that you can earn good money from 'Maryam Nawaz' ...:lol:

  1. First of all there is no one in this world solve the Pakistan Problems in Just 40 days until or unless he / she have a magic wand.
  2. Govt. took the loan to repay the amount which previous govt already spend.
  3. Yes, we immediately put reforms in our taxes and must focus the big fishes.
  4. We atleast give this govt. two years to judge their performance.
 
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Thirdly, exchange rate stability is also vital for preventing public debt accumulation. The performance in this regard is equally poor. The exchange rate has already depreciated by 6 percent in just 80 days. Accordingly, without borrowing a single dollar, Pakistan has added Rs276 billion in public debt in just 80 days – Rs3.5 billion per day.
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Exchange rate "stability"? The PKR is at 105.24 today, and sinking every day. The only "stability" we will see is a steady decline.
 
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PMLN had no other choice!!
There were lots of lies, rant and false promises in the election campaign.
Peace is very important, Specially government should focus on Karachi situation. Peace is directly linked to foreign investment.
 
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The longer you see Sharif family in power, the more you'll realize its the same as Zardari, may be less corrupt but equally incompetent but still a lesser evil.

They will do what their brothers in PPP did except in a different flavor.
 
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The longer you see Sharif family in power, the more you'll realize its the same as Zardari, may be less corrupt but equally incompetent but still a lesser evil.

They will do what their brothers in PPP did except in a different flavor.

Please tell us what your king khan has done in kpk in 90 days ? oh wait i forgot you guys are still making excuses about the election and declaring assets to ECP :rofl:

Wake up ! PML-N is working like a machine in the past 2-3 months. Load shedding has been reduced due to overcoming the circular debt, new energy projects worth billions underway, Gas and Electricity thieves are getting caught, FBR Tax Revenue increased by 25% drone strikes significantly reduced, diplomats going to central asia to get into SCO, sovereign guarantees lifted from China, reviving relations with Thailand, Nepal, FDI jumping to 17%, new infrastrcture projects (roads, tunnels, mass transit systems), fighting against dengue, flood evacuations, laws passed to ensure no beggers on streets, taxing the rich on imported cars and resource use, Railways making profit in billions of rupees.


Now that this stuff has gone though, the focus is now heading to Karachi and Taliban. Dealing with Muhajir Republican Army and Punjabi Taliban is a start for you.
 
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Please tell us what your king khan has done in kpk in 90 days ? oh wait i forgot you guys are still making excuses about the election and declaring assets to ECP :rofl:

well king khan n PTI is tryin what they can do in 90 days....there are so many hurdles coz of being only a provincial gov.....some matters are only in the hands of PMLN being in the centre
 
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Please tell us what your king khan has done in kpk in 90 days ? oh wait i forgot you guys are still making excuses about the election and declaring assets to ECP :rofl:

Wake up ! PML-N is working like a machine in the past 2-3 months. Load shedding has been reduced due to overcoming the circular debt, new energy projects worth billions underway, Gas and Electricity thieves are getting caught, FBR Tax Revenue increased by 25% drone strikes significantly reduced, diplomats going to central asia to get into SCO, sovereign guarantees lifted from China, reviving relations with Thailand, Nepal, FDI jumping to 17%, new infrastrcture projects (roads, tunnels, mass transit systems), fighting against dengue, flood evacuations, laws passed to ensure no beggers on streets, taxing the rich on imported cars and resource use, Railways making profit in billions of rupees.

Now that this stuff has gone though, the focus is now heading to Karachi and Taliban Dealing with Muhajir Republican Army and Punjabi Taliban is a start for you.
Very well said. Indeed, PMLN has been working day and night to overcome current crisis. But telling all that to PTI supporters is like "BHENS KAY AGAY BEEN BAJANA". Dont waste your energy and time on these illiterates because even if Nawaz sharif loads up their bank accounts with gold and dollars, these illiterates would still find a way to criticize him. Laughing at their stupidity is the best thing you can do. Try. I do that all the time
 
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Please tell us what your king khan has done in kpk in 90 days ?

Go here...

http://www.defence.pk/forums/national-political-issues/274890-90-days-pti.html

Or more precisely, read this post

Wake up ! PML-N is working like a machine in the past 2-3 months.

:lol::rofl:

Do you think we are some uneducated, backward, mentally disabled slaves like majority of pml(n) supporters who would believe your fairy tales? We can assess information...and assess it probably better than your sorry a$$... Please, cut with this bullsh!t...

Majority of Pakistani posters on this forum are highly educated, with alot of knowledge/exposure to Pakistani bureaucracy, politics, history, AND even international exposure...We aren't your shareefs' supporting family members bud....
Load shedding has been reduced due to overcoming the circular debt,

How much load shedding is going on in Pakistan now a days? My friends, family, and relatives tell me its the same. Near by-elections, load shedding did decrease...but now, its the same...

What is your source of this claim?
@Jazzbot @Leader @Aeronaut @Zarvan

Han bhai, is this true that load shedding has significantly decreased after shareef family-mafia assumed power?
new energy projects worth billions underway,

lol, Same was the case under PPP's era...

"Billions of dollars" worth diamer basha dam, Gwadar port opening blah blah...don't show us gimmicks....We see about that after 5 years..so don't post it now, please...
Gas and Electricity thieves are getting caught,

Source? And what is the 'magnitude' of this anti-theft operation? Small thieves are getting caught ALWAYS...its about BIG industries paying billions back to government and major reforms etc...What has PML(N) done in this regard? How does PML(N) plan to change the whole power-distribution structure so that people can't 'steal' gas/electricity? Again, nothing concrete but gimmicks from politically uneducated ancestral kami of shareef family...
drone strikes significantly reduced,

You should be ashamed of yourself for saying that!
. Just today, a drone strike happened...Nawaz didn't go sh!t infront of its American masters regarding drone strikes..

Wikileaks show that ONLY Imran Khan protested against drone strikes and American policies while no other politician, including nawaz, said a word about it in private to Americans...

America's war is over in the region..they are going back..so obviously they won't do as many strikes as they had done at the peak of war...but to say that drone strikes have 'reduced' due to shareef...what an utter shame. Even you know how pathetic you look...
diplomats going to central asia to get into SCO,

And? Zardari went to China trillion times and alot of other things...big deal? lolol...
reviving relations with Thailand, Nepal,

:lol:

Oh my majesty! what an achievement! reviving relations with 'nepal' and 'thailand' ....

Meeting diplomats, officials of different countries...and signing MoUs, some trade pacts etc is STANDARD of every. single. president/prime minister. of Pakistan! Please....

Railways making profit in billions of rupees.

Source?

Very well said. Indeed, PMLN has been working day and night to overcome current crisis. But telling all that to PTI supporters is like "BHENS KAY AGAY BEEN BAJANA". Dont waste your energy and time on these illiterates because even if Nawaz sharif loads up their bank accounts with gold and dollars, these illiterates would still find a way to criticize him. Laughing at their stupidity is the best thing you can do. Try. I do that all the time

Only one illiterate here is ancestral kami of shareefs like yourself....

You didn't explain 611 billion loan in just 40 days yet!!!!!! A record borrowing in Pakistan's history...

Not to mention, Ishaq Dar's 12 billion dollar borrowing plan from IMF....
 
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