By: Azhar Azam
Pakistan GDP (at current market price) stood at $282.5 billion (PKR 29,597.9 billion) at the close of FY2016 in June, posting a GDP growth of 4.4% ($12.4 billion) against $270.1 billion for FY2015, according to data released by SBP on 25-August-2016.
Total Debt and Liabilities $214.4 billion (PKR 21,459.4 billion)
Total debt and liabilities of central government however accounted for $214.4 billion (PKR 22,459.0 billion) as of June-2016 which includes debt of $204.8 billion (PKR 21,459.4 billion) and liabilities of $9.6 billion (PKR 999.6 billion).
The data demonstrates a formidable rise in total debt from $185.7 billion (PKR 18,904.4 billion) to $204.8 billion (21,459.4 billion) on year-over-year in June-2016; posting an increase of 10.3% (13.5% in Pak Rupee), that is, by $19.1 billion (PKR 2,555.1 billion). Debt to GDP has climbed from 68.8% in FY2015 to 72.2% in FY2016.
- Domestic Debt $130.0 billion (PKR 13,623.2 billion)
- PSEs Domestic Debt $5.4 billion (PKR 568.1 billion)
- Total Liabilities $9.6 billion (PKR 999.6 billion)
- *External Debt $69.4 billion (PKR 7,268.2 billion)
Non-government External Debt $8.8 billion
International Monetary Fund (IMF) $6.0 billion
Intercompany External Debt from Investors Abroad $2.9 billion
The cost for Total Debt and Liabilities Servicing for FY2016 remained $15.4 billion; down from $16.7 billion in FY2015, posting a decline of $1.3 billion (8.1%):
Total Debt-to-GDP Ratio 75.9%
- Gross Domestic Product (GDP)-FY2016: $282.5 billion
- Debt and Liabilities (excluding Servicing)-FY2016: $214.4 billion (75.9%)
- Total Debt (excluding Liabilities)-FY-2016: $204.8 billion (72.5%)
Total Debt and Liabilities Servicing $15.4 billion (PKR 1,610.2 billion)
- Principal Repayment of External Debt and Liabilities $3.1 billion
- Interest Payment on Debt $11.8 billion
- Interest Payment on Liabilities $0.5 billion
Overall, the Debt and Liabilities-to-GDP ratio (excluding Debt and Liabilities Servicing) and Total Debt-to-GDP ratios increased from 72.2% and 68.8% to 75.9% and 72.5% respectively.
Government Borrowed $52.8 billion (PKR 5,527.3 billion) in 03-Years @ An Average of $1.4 Billion/Month (External Debt @ $254 Million/Month)
Current government took over in May-2013, the time when central government's total debt was $137.1 billion (PKR 13,513.6 billion) including external debt of $45 billion which now has outstripped $181.8 billion (PKR 19,040.9 billion) including external debt of $51.7 billion as of June-2016. The exchange rate has also rushed from 98.5663 to 104.7619 during the same period; up by 6.1956 (6.3%).
Thus the existing government has taken a total debt of *$52.8 billion (PKR 5,527.3 billion) at last day US dollar average exchange rate of 104.7619 by June-2016 including external debt of $9.4 billion (PKR 984.8 billion); at per month average of $1.4 billion (PKR 149.4 billion) including external debt of $254 million (PKR 26.6 billion) per month.
*PKR 5,527.3 billion/104.7619=$52.8 billion
Exports Plummets by $2.8 Billion and Balance of Trade by $2.9 Billion
Exports too has plummeted by $2.8 billion in FY2016; reporting year-over-year decline by terrible 11.3%; FY2016 ($21.8 billion), FY2015 ($24.6 billion) and FY 2014 ($22.9 billion); all the sectors suffered acute setbacks by:
- Textiles $768 million (-5.7%);
- Food $690 million (-15.7%);
- Petroleum $466 million (-50.6%);
- Others Manufactured Goods $612 million (-13.9%);
- Others $252 million (-18.9%)
Balance of Trade continued to widen as well, posting a further deficit of $2.9 billion in FY2016 (16.9% YoY); FY2014 (-$16.6 billion), FY2015 (-17.2 billion) and FY2016 (-$20.1 billion).
Foreign Direct Investment (FDI) Shows Scanty Growth @ $1.3 Billion But Much Lower Than $5.4 Billion in FY2008, Even $1.7 Billion in FY2015 Foreign Direct Investment (FDI) for the past three years has been: FY2014 ($1,698.6 million); FY2015 ($922.9 million) and FY2016 ($1,281.1 million). Though there was an increase of $358.2 million (38.8%) in FDI in FY2016 on YoY but after a decline of $775.7 million (45.7%); still over 24.5% lesser than FDI in FY2014.
Moreover, there is not much FDI except from China’s $593.9 million which is nearly half of total net FDI inflows, thanks to China-Pakistan Economic Corridor. As a matter of fact, FDI from the major investing countries has declined in FY2016:
- United Arab Emirates ($218.8 million to $164.2 million)
- United Kingdom ($169.6 million to $79.8 million)
- United States ($208.9 million to $65.5 million)
- Italy ($115.3 million to $103.5 million)
FY2008 was the prime year of FDI in Pakistan when it surged to $5.4 billion but all governments failed to reap benefits and made mess of the opportunities: FY2006 ($3,521 million), FY2007 ($5,139.6 million), FY2008 ($5,410.2 million), and FY2009 ($3,719.9) before sharply weakening $820.6 million in FY2012.
Illusion of Foreign Exchange Reserves $23.1 Billion
The only credit government has been asserting is strengthening the foreign exchange reserves from $14.1 billion in FY2014 to $23.1 billion as of 19-August-2016; an increase of $9.0 billion (63.4%). Financial experts however characterize this rise “highly unsustainable” emphasizing that SBP has made it through borrowing and “a significant quantum of it by at very expensive rates”. “The government has raised $3 billion ($4.5 billion to-date) by offering Eurobonds and Sukuk at exorbitant rates of return.”
Importantly, falling oil prices internationally also helped government to boost its forex reserves as the oil import bill declined from $12.8 billion in FY2015 to $8.8 billion; a major cut by 31.2% narrowing the trade deficit by $4.0 billion.
Economy Heavily Rely On Workers’ Remittances $19.9 Billion
Pakistan hugely rely on the Workers’ remittances from overseas Pakistanis whose private inflows recorded highest in FY2016 ($19.9 billion) from FY2015 ($18.7 billion) and FY2014 ($15.8 billion); reporting an increase of $1.2 billion (6.4) against FY2015 and $4.1 billion (25.9%) against FY2014.
- Saudi Arabia ($6.0 billion; 30.0%)
- United Arab Emirates ($4.3 billion; 21.6%)
- United Kingdom ($2.6 billion; 13.1%)
- United States ($2.5 billion; 12.6%)
- Other GCC Countries ($2.4 billion; 12.1%)
- EU & Other Countries ($2.1 billion; 10.6%)
Major piece of the remittances inflows comes from Saudi Arabia and UAE but the ongoing slowdown in the Gulf region already is threatening to could decelerate this growth.
Consequently, the country’s economy is attributed by huge domestic and external debts, falling exports, uncertain exchange rate, and constrained foreign direct investment but the government is taking pride of economic growth on just artificially maintained foreign exchange reserves.
May be, this is the way “How Lion Rules”!
*figures are rounded-off so percentages may vary
Data Source: State Bank of Pakistan – Economic Data