Leading Issues in the Economy of Pakistan: Agenda for Reforms Table 16.7: Composition of Government Domestic Debt Total Increase Permanent Debt Increase Share (%) Unfunded Debt Increase Share (%) 2005-06 170-1 0 8 5 2006-07 278 53 19 59 21 2007-08 668 58 9 80 12 2008-09 587 70 12 250 43 2009-10 798 116 15 187 23 2010-11 1362 328 24 198 15 2011-12 1624 574 35 143 9 2012-13 1879 478 25 348 19 2013-14 1387 1825 132 158 11 2014-15 1285 1009 79 266 21 2015-16 1438 927 64 113 8 2016-17 1223-407-33 82 7 2017-18 1567-875-56 103 7 2018-19 4344 7427 171 276 6 2019-20 2550 1943 76 529 21 2020-21 2955 1881 64-28-1 2021-22 4752 4939 104-309-6 Cumulative 28829 20342 71 2463 8 Source: SBP (Rs in Billion) Floating Debt Increase Share (%) 163 95 166 60 530 79 267 45 495 62 836 61 907 56 1053 55 -596 43 10 0 393 28 1548 126 2339 149 -3389-77 78 3 1102 37 122 2 6024 21 The Debt Office in the Federal Ministry of Finance needs to be strengthened. The SBP policy rate is high at 16 percent currently in the presence of high rates of inflation approaching 25 percent. The policy on debt management should be to the extent possible increase the inflow of short-term and medium-term borrowing, instead of long-term borrowing. The wide-ranging reforms and improved management of public finances should lead to a fundamental improvement in the budgetary position of the Federal and Provincial Governments. A feasible target is to bring down the consolidated budget deficit from close to 8 percent of the GDP in 2021-22 to 5 percent of the GDP by 2024-25. This will facilitate the bringing down the level of Government debt to 60 percent of the GDP as stipulated in the Fiscal Responsibility and Debt Limitation Act, as highlighted in Chapter 12. Very importantly, a big reduction in the budget deficit will also lead to a strong containment of aggregate demand in the economy. This will reduce the demand for imports and simultaneously facilitate reduction of the current account deficit of the balance of payments. 172