PESHAWAR, July 11: The debt stock of the NWFP government has risen by 10 per cent in one year, pushing the cash-strapped province under more financial liabilities.

The provincial finance department’s fresh estimates shows that the government at the beginning of the last financial year owed Rs85.178 billion on account of local and foreign debts, which has reached Rs94.819 billion now, mainly because of fresh borrowings from foreign lending agencies.’

Of last year’s Rs85.178 billion debt stock, the share of foreign loans was Rs66.749 billion, which now stands at Rs79.222 billion. The size of domestic debts, however, reduced to Rs15.597 billion from last year’s Rs18.429 billion.

The size of foreign loans has been increasing since 2002 when the provincial government struck an agreement with the World Bank for acquiring $270 million loan to finance a three-year multi-sector reform programme -- Provincial Reform Programme (PRP).

On expiry of this intervention, the World Bank agreed on extending the same kind of support for the second phase of the reform programme — PRP-II — through Development Policy Credit.

The government had borrowed $222 million under the same credit facility in two tranches till last financial year.

The World Bank’s loan was obtained to remove deficien-cies the government found in implementing the reform agenda, but critics say the government is still unable to achieve any headway in areas of containing soaring wage bill, mobilisation of resources and private sector development.

The financial managers of the Frontier government, however, are not worried about the mounting stock of debts because they claim that the new foreign loans carry nominal interest rate and it helps the government in many ways.

For example, an official said the government’s strategy of reducing the size of domestic loans with higher interest rates was made possible only because of the budgetary support taken from the international lending agency.

The provincial government had been taking loans from the federal government to finance its development programmes comparatively on higher interest rates and their repayment had been hampering financial management.

In 2002, the provincial government devised a debt reduction strategy under the PRP that aimed at replacing the old expensive debts with new inexpensive loans borrowed from the open market, mostly from the World Bank.

Under this strategy, the government had prematurely retired Rs15.837 billion so far and created yearly fiscal space of Rs3.406 billion, said the official, adding the government had made an accumulative saving of Rs12.537 billion.

Critics, however, said this saving was making little difference in terms of achieving good governance, adding the fiscal space created so was largely being eaten up by the growing government machinery.

“Borrowing of loan is not a bad thing, the only problem is how we utilise it,” said a financial manager, saying the size of the civil administration in the Frontier province was growing on yearly basis without any solid justification, causing wastage of resources.