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Saturday Aug 29 2020

Public debt-to-GDP ratio increases to 87.2% in June 2020

Finance ministry says the country’s public debt is sustainable and its capacity to repay is also adequate. — AFP/File

ISLAMABAD: The Finance Ministry on Saturday, while noting that the public debt-to-GDP ratio has increased to 87.2% in June 2020, said that the country’s public debt was sustainable and its capacity to repay was also adequate.

The ministry, in a statement, said that the government plans to run primary surplus, maintain low and stable inflation and promote measures that support higher long-term economic growth.

Quoting the latest numbers from State Bank of Pakistan, the statement said that the total public debt-to-GDP ratio had increased from 86.1% in June 2019 to 87.2% in June 2020. 

It is however important to note that this figure had actually gone down to around 84% in December 2019 which was on the back of strong growth in Federal Board of Revenue (FBR) taxes and strict control on current expenditure.

Prudent economic policies had resulted in the posting of a primary surplus in February 2020 which was after a gap of many years, the statement said, adding that however, the COVID-19 pandemic had adversely impacted the economy and slowed down the government's programmes focused on reforms.

The COVID-19 outbreak resulted in reduction in revenue and increase in expenditures, decline in domestic and global demand, lower tourism and business travel, trade and production linkages and supply disruptions, etc.

Resultantly, the debt-to-GDP ratio has increased due to the sharp decline in growth and the increase in the budget deficit primarily due to COVID-19 related expenditures, during the last four months of FY 2020.

It is also pertinent to add that the according to the Global Economic Prospects report published by the World Bank Group in June 2020, Pakistan's economy has shown greater resilience than its peer in South Asia.

“In view of the foregoing it is expected that the government will be able to bring back the debt-to-GDP ratio on a clear downward path over the medium term through increase in revenues and fiscal discipline,” it said.