International Monetary Fund has taken notice of the delay in publishing the Risk Report on Debt Management which the government has withheld since March this year. According to the IMF, strengthening public debt management is a critical component of the broader public finance management reforms agenda. It has termed a regular assessment of the debt structure ‘important’, and expressed the hope that Islamabad will soon release its progress in managing fiscal constraints. To quote the IMF, “Regular and transparent periodic assessments of the public debt structure and associated risks are important to inform policy decisions on debt management.”
Economic experts have also criticized the government for delaying the release of the debts management report, saying that it is against the principle of transparency in managing public finance. Without doubt, the comments made by the IF official are likely to put more pressure on the government, as the Senate Standing Committee on Finance has also taken notice of the government’s decision to delay the release of the report. Headed by Senator Saleem Mandviwalla of the PPP, the standing committee is expected to take up the issue in its meeting next week.
It may be added here that the finance ministry released the last debt management risk indicators report in December 2016. Under a commitment given to the IMF, the next report was due in March 2017. However, no report has since been published. The report covers indicators such as Pakistan’s foreign currency debt as a percentage of the official foreign currency reserves, debt refinancing risks, interest rate risks and contingent liabilities. Some of those indicators have significantly deteriorated since the publication of the last report.
According to the latest media reports, the Ministry of Finance has announced to publish the risk report for the end June 2017 period on the Finance Division website shortly, but it has not given any reasons behind the delay. The finance ministry has also not explained why it was not releasing the March 2017 period report. Further, the Ministry’s claim that the government has never published risk report on debt management on a quarterly basis even during the IMF program is wrong as the March 2016 and June 2016 debt risks report are still available on its website.
It may be pointed out here that the government has adopted an expansionary fiscal policy and also abandoned reforms in the energy sector after expiry of the IMF program. As a result, Pakistan’s debt sustainability indicators have worsened in the past one year due to an increase in foreign exchange and refinancing risks, which appears to be the result of growing domestic borrowing needs and the government’s inclination towards foreign commercial loans. As of end June, Pakistan’s total loans and liabilities stood at Rs25.1 trillion, which were equal to 78.1% of the GDP. The gross public debt, which is the responsibility of the government directly or indirectly, was Rs21.4 trillion or 68.1% of the GDP, according to the State Bank of Pakistan. It is clear that the government’s debt management strategy is not working, and it will have to devise new ways to reduce the unbearable loan burden.