Khan Govt’s Dollar Saved Dollar Earned Mantra Behind Debt Management

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Over 28 months period (Aug 2018 thru Nov 2020), the Khan-led government received external inflows of US$26.6 billion –this amount equates to US$0.95 billion on an average per month.

Compared to the 28-month period, during the first five months of the current fiscal year (ending June 2021), Khan’s government received a gross external inflows of US$4.5 billion. That’s US$0.90 billion on an average per month for the period.

Comparison of the two monthly averages indicates lesser external inflows on an average per month than previously.

During the 28-month period, Khan’s government paid out US$23.3 for external debt servicing. That’s US$832 million a month on an average.

During the 5-month period of current fiscal year, the government paid back US$2.9 billion on account of external debt and servicing. That’s US$580 million a month on the average.

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Comparing the two periods’ time scales on external borrowings and pay outs, it appears that that while gross external inflows lessened on monthly basis, so did pay outs for debt servicing.

As both numbers reduced, the net increased as margin to finance the State and government expenditures.

Due to the Pandemic, the government has and continues to seek also debt restructuring with the multi-lending institutions, a finance management professional with the Ministry tells DesPardes.

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This has added room to the cash flow for debt servicing, the professional says.

How much of the net inflows were left in each of the two periods to run/finance other government expenditures?

During the 5-month period of present fiscal year, US$1.6 billion was left in the kitty to finance expenses. That’s US$320 million on average per month. In comparison, during the 28-month period, US$1.6 billion was used to finance expenses. That’s US$57 million on average per month.

“A dollar-saved-is-a-dollar-earned mantra, austerity, and prudent borrowings with timely payments remain the hallmark of his (Khan’s) government’s fiscal and debt management,” says an observer.

“Any impression that the government is adding up external debt is erroneous”, says the Ministry of Economic Affairs. It clarified on Friday that the “media reports about increase in foreign loans in the first five months of the current fiscal year were misleading and incorrect”.

Budget of the year 2020-2021 estimates that Khan-led Government will have to pay US$11.39 billion in external debt servicing (loan + markup). The amount also includes previous borrowings and markup on them.

“What’s needed is more revenue streams going forward,” says the observer, cautioning that “the country needs fiscal and economic reforms and restructuring as way forward”.