ISLAMABAD: The government came under fire in the Senate on Thursday for piling up external and domestic loans to alarming proportions, with a warning that the trend could lead to a situation where servicing the loans becomes impossible.

Speaking on a call attention notice, PTI Senator Syed Shibli Faraz blasted the government for an “insatiable appetite” for loans and violation of laws regarding fiscal responsibility and debt limitation.

He expressed concern over reports suggesting that the government planned to borrow Rs1.6 trillion in the current quarter. “If this borrowing spree continues, we will not be able to service the loans.”

He said it was regrettable that the government did not have the will to levy direct taxes.

‘‘A better part of the budget is eaten up by debt servicing while expenditures are increasing. Moreover, no foreign direct investment is coming.”

He also raised questions about transparency in execution of the China-Pakistan Economic Corridor (CPEC) projects, saying that the terms and conditions on which loans were being obtained must not be kept secret as it would raise doubts.

Law Minister Zahid Hamid, speaking on behalf of the finance minister, said the country’s net public debt-to-GDP ratio increased by a marginal 1.1 per cent over the first three years of the PML-N government.

On the other hand, he added, the figure was 6.7 per cent during the previous government’s five-year term and 6.8 per cent increase in the global debt-to-GDP ratio over the past three years.

Mr Hamid contended that major debt sustainability indicators had improved over the last three years.

Refinancing risk of the domestic debt portfolio came down through lengthening of the maturity profile at the end of June last year. Percentage of domestic debt maturing in one year fell to 51.9 per cent, compared with 64.2 per cent at the end of June 2013.

The minister said exposure to interest rate risk was also reduced as the percentage of debt refixing in one year decreased to 44.4 per cent at the end of June 2016, compared to 52.4 per cent at the end of June 2013.

The share of external loans maturing within one year was equal to around 31.9 per cent of official liquid reserves at the end of June 2016, as against 68.5 per cent at the end of June 2013. This indicated improvement in foreign exchange stability and repayment capacity, he claimed.

He said the present government had repaid $12 billion in external debt by June. These repayments mainly related to borrowings made by the previous government. “In spite of these heavy repayments, the forex reserves stood at $24bn — more than twice the figure of $11bn recorded in June 2013.”

The statistics shared by the minister with the house showed that the net domestic debt had shot up from Rs9.49tr in 2013 to Rs13.17tr at the end of fiscal year ending June 2016, while the external debt had gone up from $48.1bn (Rs4.8tr) to $57.7bn (Rs6.05tr) over the same period.

The total gross public debt rose to Rs19.68tr at the end of fiscal year 2016 from Rs14.3tr in 2013. Therefore, the gross public debt, which stood at 64 per cent of GDP in 2013, creeped up to 66.5 per cent.

Amnesty Scheme

Zahid Hamid informed the Senate that no final decision had yet been taken on launching an amnesty scheme for those holding wealth abroad for bringing it back to the country upon payment of a nominal tax on the declared asset.

Opposing an adjournment motion on the issue moved by Senator Atiq Ahmad Sheikh of the MQM, he said some trade bodies had asked for it and the government assured them that it would be reconsidered.

Senate Chairman Mian Raza Rabbani said he could recall a statement by the finance minister in which he had said the government was studying a proposal to launch a fresh amnesty scheme.

The chair held the motion in order and proposed a two-hour debate on the matter on Tuesday. Atiq Ahmad Sheikh had expressed apprehensions that the people who had transferred their wealth abroad would now get a legal way to bring it back to Pakistan under the scheme.

Published in Dawn, January 13th, 2017