All Pakistan Business Forum (APBF) president Syed Maaz Mahmood has said that debt servicing has become the serious issue on expenditures front amid surge in domestic and foreign loans, as public debt has reached Rs.38 trillion registering an increase of Rs1.6 trillion in FY 2020-21, reported 24NewsHD TV channel.

The APBF president said that that country’s fiscal policy over the past decade has focused on macroeconomic stabilization to counter financial crisis, calling for more emphasis on reforms to foster long-term inclusive growth by adapting to advancing technology and deepening global integration. The government claimed that the increase in public debt is much less as compared to the increase of Rs2.499 trillion reported during the same period of last year, yet it accounts for 80 percent of the GDP.

Debt service is the cash that is required to cover the repayment of interest and principal on a debt for a particular period. “Total debt of the government is standing at 70.7 percent of the GDP while domestic and external debt is standing at 54 percent and 26 percent of GDP, respectively,” he added.

APBF Chairman said that the government's reliance on debt is a violation of the country's Fiscal Responsibility and Debt Limitation Act 2005, which states that the government must limit debt to 60 percent of GDP while currently the ratio is present at 78 percent of Pakistan's $303 billion GDP.

He says the government borrows heavily not only to finance current expenditures but also to service existing debt. Syed Maaz Mahmood said that reforms will require a growth-friendly budget, re-composition to upgrade tax, social spending, and active industrial policies in close consultation with the real stakeholders to achieve the sustainable development goals.

APBF President said that amid high discount rate and instability in exchange rate, the country's total debt and liabilities are skyrocketing, rising at high speed in the wake of soaring budget deficit.

Syed Maaz Mahmood said that over the last couple of years, development spending has been reduced to meet fiscal targets set up by the IMF, which has hindered projects that directly affect people's welfare, as resources that could have been spent on essential sectors like health, education or public investment are now being dedicated to interest payments, he added.