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This column that Miftah Ismail calls "lucid" is so bogus that I don't know whether to laugh at the guy who wrote it or feel sorry for those like myself who have had the misfortune of reading it. https://twitter.com/MiftahIsmail/status/1359413090916392960
Facts are as follows:
The change in the public debt under this government is due to a correction of the flawed economic policies of the previous regime, especially its overvalued exchange rate and excessive borrowing.
The change in the public debt under this government is due to a correction of the flawed economic policies of the previous regime, especially its overvalued exchange rate and excessive borrowing.
Interest Expenses: The previous government resorted to short-term debt instruments without maintaining adequate cash buffers, and relied heavily on SBP borrowing. This short-term debt profile has resulted in high interest costs on past debt.
The present government has had to pay Rs 5.7 trillion (47% of the increase) as interest on debts borrowed by the previous regime.
Amazing how the writer and Miftah sb are so casually claiming that there was no debt repaid and no increase in debt can be put down to debt servicing
Amazing how the writer and Miftah sb are so casually claiming that there was no debt repaid and no increase in debt can be put down to debt servicing
when that has been the single biggest component of the increase in public debt; nearly half of the overall increase! Even a schoolboy would understand you have to pay interest; you don't simply pay back 100 PKR if you borrowed 100 PKR from a lender. That interest was 5.7 tr.
Currency Devaluation Impact: The previous government artificially maintained the exchange rate of the Rupee much above its market value. A large increase in public debt has resulted from the abrupt exchange rate depreciation, which was inevitable because the overvalued exchange
rate triggered a balance of payment crisis. The only alternative was a default on external liabilities, which was obviously not an option.
Public debt increased by Rs 3 trillion (25% of the increase) due to this currency devaluation.
Hence, 8.7 tr or 72% of the increase in
Public debt increased by Rs 3 trillion (25% of the increase) due to this currency devaluation.
Hence, 8.7 tr or 72% of the increase in
public debt is down to just these two factors which cannot be attributed to PM IK or PTI by any logic. These are down to the past govt's policies.
The borrowing by PTI govt for financing the primary deficit is 2.5 tr (21% of the increase) while 0.6 tr (5% of the increase)
The borrowing by PTI govt for financing the primary deficit is 2.5 tr (21% of the increase) while 0.6 tr (5% of the increase)
has been borrowed from banks to maintain cash buffers since it was decided that there would be no borrowing from SBP as a matter of policy.
A further 0.3 tr (approximately 2% of the increase) is due to the difference in face value and realised value of government bonds issued
A further 0.3 tr (approximately 2% of the increase) is due to the difference in face value and realised value of government bonds issued
during this period.
In other words, one can question the PTI govt on 3.4 tr or 28% of the increase in public debt while the remaining 8.7 tr or 72% needs to be explained by Miftah sb and his party. Who is the undisputed PM of debt based on these figures?
In other words, one can question the PTI govt on 3.4 tr or 28% of the increase in public debt while the remaining 8.7 tr or 72% needs to be explained by Miftah sb and his party. Who is the undisputed PM of debt based on these figures?
Another clear attempt to mislead readers is made by the write when he says:
"On the external front, contrary to his bold promises, Imran Khan has borrowed from other countries as well as the IMF. Government external debt has ballooned from Rs7.8 trillion in June 2018 to
"On the external front, contrary to his bold promises, Imran Khan has borrowed from other countries as well as the IMF. Government external debt has ballooned from Rs7.8 trillion in June 2018 to
Rs12 trillion in September 2020, an increase of Rs4.2 trillion or 54 percent in just over two years, compared to an increase of only Rs3.5 trillion in the PML-N’s entire five-year term."
Firstly, here is a video of IK before 2018 elections saying we would need a bailout thanks to the record CAD left by PMLN. Hence, the assertion that there was a promise to not go to IMF is false, like most of the writer's claims. https://twitter.com/razzblues/status/1049577970623365120
Secondly, Public External Debt was $51.245 bn in Jun-13 which increased to $75.357 bn in Jun-18 under PMLN. That's an increase of 47% in dollar terms which is what is relevant since we pay back in forex, not PKR.
Specifically, in the last 9 quarters of PMLN from Mar-16 to Jun-18, it increased from $58.728 bn to $75.357 bn. That's an increase of $16.629 bn or 28%, thanks mainly to high CAD which was a direct result of their policy of overvalued PKR.
In comparison, in the 9 quarters under PTI, the Public External Debt increased from $75.357 bn in Jun-18 to $88.938 bn in Sep-20. That's an increase of $13.581 bn or 18% which is less than PMLN's external debt accumulation in their last 9 quarters both as % and in absolute terms.
Once again, who is the undisputed PM of debt based on these numbers? Any answers, @MiftahIsmail sb?
You can verify these numbers from SBP's website.
You can verify these numbers from SBP's website.
Note: I took the breakup of the increase in Public Debt from the clarification titled "Clarification - Change in Public Debt from 1st July 2018 to 30th November 2020", dated 20 Jan 2021:
http://finance.gov.pk/rebuttals_details1.html#20012021
http://finance.gov.pk/rebuttals_details1.html#20012021
