Public debt soars Rs240 billion after recent rupee depreciation

Wednesday, December 14, 2011

Public debt soars Rs240 billion after recent rupee depreciation

Mehtab Haider

ISLAMABAD: Recent decline in the rupee value vis-à-vis dollar has caused the country’s public debt to swell by Rs240 billion in just a few weeks resulting in serious implications for budgetary estimates and the interest repayments.
“The depreciation of the rupee from Rs60 to Rs89 to a dollar has caused Rs1,400 billion rise in the public debt during the last four years,” Dr Ashfaque Hassan Khan, Dean NUST Business School (NBS) said while chairing a session on ‘Exchange Rate Dynamics’ in a conference organised by the Pakistan Institute of Development Economics (PIDE) on Tuesday.
Khan said that the rupee depreciation would result in increased prices of the furnace oil so there would be no other choice but to increase electricity prices or the subsidy amount from the national kitty was bound to go up. The prices of petroleum products will also rise due to the depreciation of rupee against dollar even if the prices in the international market remain stable.
He said that external debt stood at over $60 billion and depreciation of Rs1 was causing Rs60 billion jump in the public debt burden. The recent depreciation of rupee has caused jump in public debt by Rs 240 billion, he added.
Earlier, in her presentation, Sunila Jabeen, an economist, stated that money supply played a significant role for real exchange rate. Ahmed Khalid, who is senior economist, stated that US dollar has the highest weight compared to other currencies.
In a separate session on ‘Growth and Enterpreurship’ it was revealed that Karachi’s firms are more innovative compared to other cities like Lahore and Faisalabad. The innovation in Karachi’s firms is doubled compared to Lahore.
“Textile and chemicals sectors are the more innovative sectors compared to other sectors,” experts said. In the Mahbub Ul Haq memorial lecture, entitled ‘Arguing Inequality: Reflections on Societal Crisis,’ Ashwani Saith, Dean International Institute of Social Studies, challenged various viewpoints that have been advanced by politicians, economists, and development practitioners in support of inequality as a preferred social outcome. The presenter questioned the instrumental defense of inequality as being the grease to the wheels of commerce by highlighting the lessons learned from recent financial crisis which was an outcome of the greed of the investment bankers.
Saith also pointed the preoccupation of some development policies on the alleviation of poverty rather than on ensuring equity. Later in the day twelve papers were presented in the first technical session. One panel discussion on economic reforms and competitiveness was also a highlight of the day. The panelists included, among others, Gerardo della Paolera, president of the Global Development Network (GDN).