KARACHI: Interest payment on domestic debts showed a growth of 18.2 per cent during July-January period of 2014-15.
The government’s approach to accumulate long-term domestic debts is hurting economy as interest on such debts is much higher.
The State Bank in its latest Monetary Policy Information Compendium for March 2015 reported that the domestic debt increased by Rs788 billion. It includes Rs5bn foreign currency instrument.
During the same period, the government had to pay Rs746bn in debt servicing, indicating a narrow gap between the accumulated debts and debt servicing. It means the government would have to borrow more to match the debt servicing requirement.
In the same period of last year, the government paid Rs632bn as debt servicing while the total debt servicing at the end of 2014 was Rs1.043 trillion.
The prevailing trend of debt accumulation and higher debt servicing shows that at the end of this fiscal year, total debt servicing would be much higher.
The stakeholders and independent analysts are criticising the government over high-yield bonds, like Pakistan Investment Bonds (PIBs).
The PIBs were sold to banks and other investors without caring for the rate of return on it.
The State Bank report showed that accumulation of permanent debts was the real reason of high debt-servicing. The permanent debts include PIBs, prize bonds and others which collectively increased by Rs697bn during the first seven months of this fiscal year.
However, the major contributor was PIB debt that rose to Rs664bn in the said period.
The debt servicing on PIBs jumped by 154pc during this period compared to the corresponding period of last year.
The State Bank reported that the amount paid as debt servicing on PIBs was Rs393bn during the July-Jan period compared to Rs155bn in the same period last year.
