Mortgage New Assets for Rs2tr Loans


ISLAMABAD:

The federal cabinet on Tuesday approved the pledging of Pakistan’s coastal infrastructure, sports and tourism facilities and some remaining major road networks to raise more debt after borrowing nearly 2 trillion rupees by guaranteeing all major airports and highways over the past year.

The cabinets of former Prime Minister Imran Khan and Prime Minister Shehbaz Sharif distributed national assets to raise loans, but failed to change their spending habits, which has already increased federal government debt by nearly 45 trillion rupees.

Led by Prime Minister Shehbaz Sharif, the federal cabinet approved the granting of six additional national assets as collateral to domestic and international lenders — 10 days after the same top decision-making body approved the government deficit bill. 4.6 trillion rupees for the financial year 2022-23.

Planning Minister Ahsan Iqbal told the media on Tuesday that the federal cabinet had approved a finance ministry summary regarding the issuance of domestic and international Sukuk against government assets. He did not disclose details of the assets.

But the summary showed that the cabinet approved the pledging of parts of West Wharf and East Wharf, Karachi, Pakistan Tourism Development Corporation (PTDC) land and hotels and parts of Islamabad Sports Complex.

Cabinet also approved the granting of Islamabad Metro, portions of Grand Trunk (GT) road, Islamabad Expressway, portions of Makran Coastal Road (N-10) and of the Indus (N-55) as collateral to raise the debt.

The federal cabinet also authorized the Ministry of Finance to issue domestic and international Islamic bonds to indebt the assets. However, international bonds cannot be issued until Pakistan is able to secure an agreement from the International Monetary Fund.

Just a year ago, the federal cabinet under former prime minister Imran Khan also approved bailouts for national highways and airports to raise debt, which the finance ministry has nearly depleted. Over the past year, the Ministry of Finance has raised 1.2 trillion rupees of debt by pledging national road assets as collateral and another 672 billion rupees by pledging airports as collateral, the finance ministry has informed. in the federal cabinet.

The previous PTI government issued domestic Sukuk bonds against Jinnah International Airport, Karachi; Allama Iqbal International Airport, Lahore; Multan International Airport; and NHL roads and highways. For international sukuk, the PTI government had used various sections of the M2 highway.

READ With outlay of Rs9.5tr, government counts on loans

Overall, the Federal Government undertook 52 domestic transactions worth Rs 3.2 trillion and five international sukuk transactions worth $4.6 billion.

The Ministry of Finance said Sukuk transactions would help secure better prices compared to other means of raising domestic and external resources like treasury bills, Pakistan investment bonds and conventional Eurobonds.

However, the Ministry of Finance could not get a better response from domestic investors who only provided loans of 66 billion rupees against the target of 100 billion rupees. Having exhausted most conventional borrowing, the cash-strapped Federal Government has also fully tapped Islamic finance markets which until recently had close to Rs 1 trillion in funding.

On June 10, the federal cabinet approved the budget for the financial year 2022-23 with a federal budget deficit target of 4.6 trillion rupees, which will be financed by domestic and foreign lenders. However, the federal government does not seem to mend its ways and has allocated funds liable to be diverted.

The government has given 70 billion rupees to parliamentarians for politically motivated development programs and 500 million rupees has been allocated to the supposedly closed Earthquake Reconstruction and Rehabilitation Authority.

The Rs 60 billion subsidies were given for the supply of cheaper gas and electricity to the so called export oriented industries. About half of export-tied subsidies are used against domestic production – the plunder that the government can easily stop by tying export subsidies to actual export earnings.

Dozens of programs have also been included in next year’s development program, which are being finalized without proper technical evaluators.

The fiscal strategy paper which the cabinet approved on June 10 also revealed that the federal government’s debt will rise to 48.5 trillion rupees by the end of June, almost double from four years ago. Moreover, the federal government debt is expected to reach 54.1 trillion rupees by June next year, an addition of 5.6 trillion rupees or 11.5%.

Despite the stark numbers, the federal government doesn’t seem serious in throwing out numbers on the primary budget surplus and the number it presented in the budget is unrealistic.

The budget document showed that the debt-to-GDP ratio will increase and reach about 72.4% by the end of the current fiscal year, mainly due to the increase in the federal budget deficit and the depreciation of the rupee by against the US dollar.

He said the debt-to-GDP ratio is expected to drop to 69.1 percent by the end of the next fiscal year thanks to the government’s fiscal consolidation efforts. The Ministry of Finance’s projections for next year have barely turned out to be correct in the past.

In 2017-2018, the tax-to-GDP ratio of RBF was 11.7%, which fell to only 8.5% in the 2020-21 financial year.

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