Bank Borrowing
Domestic debt is also categorized between debt held by banks and non-banks (see Table VII.3). As discussed in Chapter V, the absence of targets to contain central bank financing in FY00 resulted in a compositional change in government borrowing, from commercial banks to SBP. Scheduled bank holdings of treasury bills fell from Rs 204.2 billion in FY99 to Rs 103.8 billion in FY00, while borrowing from SBP increased from Rs 366.8 billion to Rs 558.5 billion in the same year.

Table VII.3
Debt Held by Banks And Non Banks
(Rs billion)

Table VII.4
Domestic Debt Servicing (Interest Payments)

Source: Ministry of Finance

External Debt
This section is different from previous Annual Reports in that debt categories are explicitly defined and more comprehensive picture of Pakistan’s external liabilities is presented. At the onset it would be useful to differentiate between external debt and liabilities. External debt is the sum of: (1) public and publicly guaranteed debt, (2) private non-guaranteed credits, (3) central bank deposits, and (4) loans due to the IMF. It has the following broad characteristics: it is actively solicited, has a well-defined repayment structure, and is held by non-residents. Liabilities, on the other hand, have the following characteristics: (1) repayments are not structured by any set schedule, (2) the government does not receive the Rupee counterpart funds in all cases, (3) it is not generally solicited, and (4) is primarily held by residents. While the revised format is given in Table I.4, a reconciliation table is given below that shows the difference between the previous and revised formats (Table VII.5).

Long-Term Debt
While the revised categorization of external debt/liabilities is discussed in greater detail later, in order to maintain consistency in the formats that have been used in earlier Annual Reports, the tables shown in this Chapter are comparable with previous Annual Reports. Looking at Pakistan’s external debt situation at the end of FY00 (Table VII.6). There has been no significant change in the outstanding volume of LT debt. This clearly shows that Pakistan’s LT debt is not the problem, but the repayments on ST debt, and more importantly, Pakistan’s external liabilities that have forced a rescheduling.

Furthermore, Table VII.7 shows the profile of Pakistan’s creditors under public and publicly guaranteed debt. As can be seen, the largest share in LT debt stock is due to consortium creditors, which shows the dominant role of G-7 countries. These loans are made by a host of development agencies, but end-use tends to be strictly specified by the donors. The increase of US$ 503 million is driven by lending from Japan. This reaffirms the supportive role of Japan vis-à-vis other G-7 countries. The outstanding level of debt to Islamic countries has fallen, which suggests that LT funding was not made available during this trying period. However, in kind assistance, specifically the Saudi Oil facility and central bank deposits from certain Gulf countries, did make a significant difference in Pakistan’s balance of payments.

Table VII.5
Reconciliation Table - External debt:
previous & revised format
(US$ millions)

PPG: Public and Publicly Guaranteed Debt.

Short & Medium Term Debt
Table VII.8 shows short and medium term debt as a sum of private loans/credits, commercial loans/credits, IMF financing, and funding from IDB. The stock of S&MT debt decreased by 14.5 percent over FY99, on account of falls in all four sub-categories mentioned above.

Table VII.6
Outstanding External Debt to Official Creditors
(US$ million)

LT= Long-term, ST= Short-term, MT= Medium-term; a: breakdown in Table VII.7.
Note: Figures in parentheses represent percentage share in total.

Table VII.7
LT Public & Publicly Guaranteed Debt Outstanding
(US$ million)

Source: Economic Affairs Division

As shown in Table VII.8, there is no real change in the outstanding debt to IMF/IDB since the mid-1990s, while private loans rose sharply in FY94 with funding for IPPs playing an important role. The increase in the stock of commercial loans in the mid-1990s coincides with the increasing use of trade finance by foreign banks operating in Pakistan. The volatility shown is a reflection of the ST nature of the borrowing, the demand for import finance and, the uncertainty whether new loans would be forthcoming.

Although Table VII.9 shows the obvious impact of the nuclear tests on Pakistan’s sovereign ratings, what is interesting to note is that despite regular use of ST financing to meet external payments from the mid-1990s to May 1998, the country’s sovereign ratings did not worsen. This allowed Pakistan to continue using ST commercial credit.

Table VII.8
Details of Short/Medium Term Loans
(US$ million)