ISLAMABAD: The World Bank has projected Pakistan’s debt-to-GDP ratio to ease to 90.6 per cent in the current fiscal year and 89.3 per cent in the next fiscal year 2022/23.
The World Bank in its recent report “Pakistan Development Update October 2021” said that the total debt-to-GDP ratio had peaked to 92.7 per cent in 2019/20; however, it had been declining since then.
The public and publicly guaranteed debt declined to 90.7 per cent of GDP at the end of June FY21, down from 92.7 per cent at the end of June FY20.
At the end of June FY21, the external debt accounted for 33.9 per cent of the total public debt, whereas short-term debt accounted for 16.2 per cent, indicating the low rollover risks, the report added.
The public and publicly guaranteed debt included external general government debt, domestic general government debt, guaranteed debt, and public and publicly guaranteed debt.
It said the rupee had already depreciated 7.7 per cent against the US dollar over the first quarter of FY22. Given that the external debt is a third of the total public debt stock, the depreciation of the currency has implications for the public debt, which was already above 90 per cent of GDP.
Meanwhile, the report said in FY21, the fiscal deficit, excluding grants, narrowed to 7.3 per cent of GDP from 8.1 per cent in FY 20, as the revenue growth, underpinned by stronger domestic activity, outpaced higher expenditures.
Further, it added that despite fiscal consolidation efforts, the deficit, excluding grants, is projected to remain high at 7.1 per cent of GDP in FY22 and widen to 7.2 per cent in FY23 due to the pre-election spending.
The implementation of critical revenue-enhancing reforms, particularly the harmonisation of the general sales tax, will support a narrowing of the fiscal deficit over time. The public debt will remain elevated in the medium-term, as will Pakistan’s exposure to the debt-related shocks.
The report also projected Pakistan’s poverty rate to ease in the coming years. “Bolstered by the recovery in the industry and services sectors and resultant off-farm employment opportunities, poverty incidence, measured at the international poverty line of $1.90 PPP 2011/day, is expected to have declined to 4.8 per cent in FY21 from 5.3 per cent in FY20,” it added.