Due to the record depreciation of rupee against the greenback, the total size of Khyber-Pakhtunkhwa (K-P) debt has increased by Rs95 billion, touching Rs454.35 mark. At the end of the last fiscal year on June 30, 2022, the provincial debt stood at Rs359.33 billion which has now jumped up by 26 per cent due to the higher dollar exchange rate. It may be mentioned here that the dollar exchange rate has been calculated at Rs224 in the official documents and the actual size of the province debt is much more taking into account the open market exchange rate.
As per the debt bulletin issued by the government on mid-term debt, several financial organizations released funds for development projects amounting to Rs30.12 billion this fiscal year while the province paid back Rs11.17 billion. As per the debt bulletin of the finance department, the debt and loans made 3.19 per cent of the total revenue of the province and it could increase to 10 per cent. This fiscal year K-P received a total of $100 billion from Asian Development Bank (ADB) to the health department and $3.6 million for water resources development. Similarly, $54.7 million were paid for emergency flood assistance.
The bulletin shows that in June 2016, the province had a debt of Rs116.07 billion and the provincial government also paid back Rs7.46 billion debt. It increased to Rs160.70 billion in 2018 while in 2020, the provincial debt jumped up to Rs263.71 billion. In 2021, the debt touched Rs294 billion mark while next year it reached Rs359.33 billion which hit an all-time high Rs454.35 billion. It may be mentioned here that the K-P got 56.80 per cent of its loans on fixed mark up while the remainder 43.20 per cent was acquired on non-fixed mark up.
The largest lender to K-P is ADB which owes the province Rs230.16 billion. It is also worth mentioning here that the province got 388.28 billion in US dollar while Rs37 billion were procured Japanese Yen and Rs23 billion in Euros. Similarly, a Rs4 billion loan was taken in Pakistani currency. It may be mentioned here that the previous PTI provincial government was highly criticized by its political opponents for its policy of taking huge loans for development projects on the ground that the successive governments would have to pay them back and it would be a cumbersome liability for them.
Despite all the criticism the provincial government continued its policy of taking huge loans and claimed that these loans were being spent on the development of the province. In 2021, the provincial government signed an agreement for $400 loan for Spending Effectively for Enhanced Development (SPEED) programme with the World Bank. The programme is aimed at facilitating the government of K-P in improving the availability and management of public resources for the delivery of primary, middle and high school education and primary health services in the province.
The scheme will add a medium-term perspective to fiscal planning and budgeting to create fiscal space for education and health service delivery and provide funding and staff for such service delivery. Improved management of public finances will be ensured by delegating greater financial management.
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