At end of December 2009, country’s total EDLs stood at unprecedented $55.675 billion or 32 percent of GDP, while in June 2008 these stood at 46.16 billion dollars (27.6 percent of GDP), the State Bank of Pakistan (SBP) reported Thursday.

The stagnant exports and foreign exchange earnings, together with heavy reliance on foreign resources, were the main factors contributing to the worsening of the external debt indicators.

In six-month period, from June to December 2009, these increased by $3.34 billion, as on June 2009, liabilities were recorded at 52.33 billion dollars.

According to the bank’s figures, out of these liabilities, external debt stood at $54.453 billion against $50.76 billion at end June 2009 and $53.99 billion in September of the same year.

The Ministry of Finance latest summary of Pakistan’s consolidated federal and provincial expenditure figures also reported that during July-December 2009-10, on external debt servicing, Islamabad has spent about $375 million that is 0.2 per cent of GDP.

Already the debt-servicing burden has progressively reduced the government’s ability to undertake much needed infrastructure development projects, and further rise in debt burden would hamper country’s efforts for social and economic development, economist believe. Debt service burden has also a negative impact on labour and capital productivity, which adversely effects economic growth.

Besides, back-record of external debt of the country also reveals a significant increase in last few years. As on June 30, 2003 external debt stood at $32.46 billion, June 2004 ($32.93 billion), June 2005 ($34.04 billion), June 2006 ($35.89 billion), June 2007 ($39.5 billion), June 2008 ($44.87 billion), June 2009 ($51.06 billion) and now at the end of December 2009, it has jumped to $54.45 billion. Increased debt burden could negatively affect economic growth by reducing capital accumulation and productivity.

Foreign exchange liabilities comprising on central bank deposits, foreign currency bonds and other liabilities almost stood stagnant at $1.22 billion since June 2008.

Independent economists believe that the increase in public debt could have severe long-term direct and indirect negative impact on economy. They say the government to make strong fiscal adjustments instead of more borrowing. Otherwise, in coming years, debt problem will cause severe macroeconomic consequences like low economic growth, closure of businesses, rising unemployment and poverty, deterioration of physical and human infrastructure, high inflation, pressures on exchange rate, discouragement of both domestic and foreign private investment etc.

Lessening over-dependence on external debt needs improvement in economy’s competitiveness in order to stabilize macro imbalances and helps mobilize domestic resources.

A viable monitoring system was also a need of the hour, which could ensure proper and systematic utilization of the external borrowings for the developmental projects. Provision of a favourable macroeconomic environment was also needed for reducing mismanagement to promote economic growth.

He assured that no official of tax collecting department would harass any industrialist or other tax‑payers.

On pointation from Chairman KATI , Mian Zahid Hussain, Mr Tareen said he had already directed the Federal Board of Revenue (FBR) authorities to rush to Karachi and address the complaints of businessmen about the Customs especially the demurrage issue at the sea‑ports here.

He agreed to the proposal from KATI member that for better management KESC can be bifurcated into two or three distribution companies, and that like in Lahore the generation and distribution can be separated.

He noted that KESC has shown no improvement even after its privatisation and that it continued to incur billions of rupees losses every year. KESC has been nothing to power supplying agencies like PEPCO and it owes billions of rupees.

“ KESC is getting just free power supply from Government. Even than it has failed to deliver to people,” he remarked.

He said a high level Government meeting is scheduled to be held in Islamabad on January 05, 2009 where various important issues would be discussed including KESC and practical solutions would be found and the decisions would be taken to provide some relief to industry and the general public on various accounts.

The PM’s Advisor informed the business community that the Government is working out to solve gas and electricity supply, and the tariffs issues.

He said new policy on gas and electricity will be announced soon. This is based on equalization of tariff for all kind of consumers—industry, small business units and domestic‑to slash the burden on the industry of subsidies being given to other categories of the consumers. This will help in reducing the cost of doing business for industrialists in the country.

“ I strong believe that all the consumers should pay same price of electricity and gas ,” he asserted adding that if the Government wants to provide some relief to any category of the consumers it should give subsidy directly to them.

He said the Government was going to take various important decisions soon on gas and power to the satisfaction of the business community.

He said the Government has also initiated the formulation of national industrial policy and the process would be carried on through maximum participation of business community of the country.

He assured that due representation of the business community would be ensured on the boards of all policy‑making Government institutions including Federal Board of Revenue ( FBR) , National Power Regulatory Authority (NEPRA) and Oil and Gas Regulatory Authority (OGRA) to make the polices and systems more practical and targeted‑oriented.

The present Government’s main focus is to strengthen manufacturing and agriculture sectors which have great potential to grow and diversify , he said.

The PM’s Advisor on Finance and Economic Affairs said the Government was using all options and resources to bring the inflation and interest rate down to single digit.

On pointation from the business leadership that during the last few years the banks have been earning undue profits, with spread up to 7 percent, the Advisor suggested that through interactive meetings of the bankers and the business community the issue would be weighed and settled to the satisfaction of all the stakeholders.

“ I would like to request the bankers to provide maximum relief to the businessmen and the public,” he said.

He said the core inflation was coming down and when the data of December 2008 would come out, there would be significant decline in the inflation rate.

About the interest , he said he would arrange meetings of the business representatives with the new Governor State Bank of Pakistan to provide both sides a platform to convince each other so that the banking policies should win the confidence and support of the businessmen.

Mr. Tareen said that he would not support tight monetary policy in the country when oil and food prices were coming down.

He assured the KATI leadership of his full support in establishment of the proposed S.M.Muneer Economic University in Karachi.

Others who spoke included Patron‑in‑Chief of KATI, S.M. Muneer, Chief Executive Officer of KITE Limited and senior businessman Abdul Haseeb Khan.

Federal Advisor on Textile Industry and Chairman of Baig Group of Industries, Dr. Mirza Ikhtiar Baig was also present.