Pak debt spiral shoots; Imran govt rents out PM house to raise funds

The vicious debt trap has forced Pakistan to ludicrous levels of austerities – the country has apparently put the official residence of the Prime Minister on rent, meaning the house will be rented out to host fashion shows and cultural and educational events to generate funds, media reports said.

Prime Minister Imran Khan has already shifted to his other residence at Bani Gala in Islamabad in a residential locality on the eastern bank of Rawal lake.

In September 2018, Khan had garnered (Pakistani) Rs.23 lakh (one Indian rupee equals 2.19 Pak rupees/Pkr) when his PTI government auctioned eight buffaloes kept by his predecessor Nawaz Sharif at the PM House for his “gastronomic requirements”. The government auctioned 61 luxury cars recently, raising some Rs.200 million. The plan was to auction 102 surplus cars, including bullet-proof vehicles, and four helicopters used by the Cabinet Division.

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The sale of three buffaloes and five calves belonging to the PM house had fetched Pkr 2,302,000 in an auction held in Islamabad, Dawn newspaper had said, adding that most of them were bought by supporters of ousted Prime Minister Nawaz Sharif.

Pakistan’s public debt went past 87 per cent of the GDP at the end of 2019-20, up from about 72% of GDP at the end of 2017-18. The country’s total external debt and liabilities rose to $113.8 billion in fiscal year 2020 from $106.3 billion in the fiscal year 2019.

Earlier this year, the country’s finance minister Dr Hafeez Sheikh while presenting the fiscal policy and debt policy statement to parliament revealed that Pakistan’s total debt is Rs 36.5 trillion with Rs 11.5 trillion borrowed during the past two years — Rs 600 billion for debt servicing, Rs 3 trillion for the rupee-dollar parity correction and 1.5 trillion rupees for subsidies to meet the tax shortfall due to COVID-19 outbreak.

Debt servicing has become the biggest problem for the government as it must borrow continuously to pay back the previous debts.

Data released by the State Bank of Pakistan reveals that the Imran Khan government paid $11.895 billion in external public debt servicing during 2019-20 and $3.593 billion during the first quarter of this fiscal year.

A major source of ‘circular debt’ or the power sector’s outstanding debt is the fixed costs paid to the independent power producers that contribute significantly to electricity generation in Pakistan. However, the primary cause is the capacity payments to large power projects set up since 2015, primarily as part of the multibillion-dollar China Pakistan Economic Corridor (CPEC) initiative.

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Things have come to such a pass that the Pakistan federal government has considered mortgaging the gigantic Fatima Jinnah Park in the F9 sector in Islamabad for procuring a loan of 500 billion PKR, as per Pakistan media reports. This comes amid declining relations of Pakistan with its two biggest sources of foreign remittances and foreign exchange — Saudi Arabia and the United Arab Emirates (UAE).

As if it was not enough, the Pakistan government has decided to mortgage the country’s major airports and road network and issue Sukuk bonds, Federal Information Minister Fawad Chaudhry said in June this year. A sukuk is an Islamic financial certificate, similar to a bond in western finance, that complies with Islamic religious law Sharia.

The summary to mortgage government assets for large-scale borrowing through issuance of Sukuk bonds was approved by the federal cabinet, Geo News reported.

According to the summary, Sukuk bonds will be issued and loans will be taken out, keeping Islamabad Expressway, Islamabad-Peshawar Motorway, Pinid Bhattia-Lahore motorway section, and airports of Lahore, Islamabad and Multan as collateral.