Former Pakistan finance minister proposes rescheduling external debt

The former federal finance minister of Pakistan, Shaukat Tarin, and the spokesperson for Economic Affairs, Muzzammil Aslam, have criticized the government for failing to ensure that the general public is benefiting from the declining value of oil prices globally.

Former Pakistan finance minister criticizes government

Tarin and Aslam said that oil prices globally have been declining. However, the current government has not taken any measures to ensure the decline is felt by the consumer. The two noted that during the first week of November, a barrel of oil was $94, but this had since dropped to $74.

They also noted that despite the low petroleum prices, the government had taxed consumers Rs 36 billion for the Petroleum Development Levy, which is a contrasting image from what the government has been touting in public.

Tarin also spoke about the inflation data saying that the consumer price index (CPI) increased to 23.6%. The core inflation was at around 14.5%-18.5%, and there was a likelihood that it would continue increasing if the government increased the gas prices and imposed more taxes. This was likely to happen as the government sought to increase revenues amid a surge in expenses.

Amid these economic changes, he has called upon the government to ensure that the people are relieved from the increasing financial burden. He has also urged the government to fund incentive schemes and other programs such as Sehat Card and Kamyab Pakistan Program. The government also wants to impose subsidies for fuel, electricity, gas, and fertilizers.

Rise in external debt payments

The State Bank of Pakistan also recently raised by discount rate by 100 basis points, meaning that the government debt payments will increase. Moreover, the IMF was also demanding additional taxes of Rs.8-00 billion.

They have also said that the reserves maintained by the central bank would gradually drop and decline to $7.4 billion amid a rise in external debt payments. The central bank wants to make around $1 billion in payments in the coming days, which will deplete the reserves. Reserves are expected to drop to $16.4 billion by next week.

The two further added, “If we add up all the inflows and rollovers, the government is still short by almost $16-20 billion; therefore, there is a need to reschedule the entire external debt and obtain fresh financing of up to $15 billion to revert the default.”

Moreover, there were speculations that the economic situation would worsen amid an 18% drop in imports in November. Home remittances had also dropped by 9% year-over-year. The gap was expected to widen because of the changing interest rates. Foreign direct investment had also dropped by 75%.