Distributional Implications of Interest Receipts & Payments of the Government
Estimates in Tables 1 to 7 can be used to analyse the distributional implications of the interest transactions of the government. It is evident from the tables that the major interest receipts of the government came from the provinces. Financial institutions and public sector corporations (PSCs) which received sizable amounts of loans (channelled through the federal government) did not contribute to the interest receipts of the government in proportion to the amounts received by them. This means that the government receipts of interest came relatively more from the projects or individual using provincial loans and less from those benefiting from financial institutions and PSCs. Payments made by provinces most probably came from taxes paid by the people at large whose effective burden is usually shared by low- and middle-income groups. On the other hand, it is now well established that the major beneficiaries of loans from financial institutions are big companies and influential borrowers. The loans provided to PSCs in the first place have not been used efficiently and the major beneficiary of the loans has probably been public bureaucracy.
On the side of interest recipients we can see from Table 6 that the major share went to domestic debt holders (53 percent in 1979-80 and 75 percent in 1991-92). Among them the most prominent beneficiaries are those holding unfunded debt (48 percent in 1985-86, 53 percent in 1988-89 and 33 percent in 1991-92). Within the unfunded debt categories the major share of interest is received by holders of Khas deposit accounts and Khas deposit certificates. Although the information regarding the distribution of investment in these schemes by income groups is not readily available, it is generally believed that majority of investors in these schemes is not necessarily small savers. People with black money and having access to cheap loans through political sources have also been observed to invest in these schemes to whiten their money and cam the differential profit margin offered by them.
This description of the contributors and recipients of interest on public debt points out that the distributional impact of these loans on the economy may not have been very healthy one.
Total Interest Receipts and Payments by Govt of Pakistan (Selected Years) Table 1
Years |
Total |
Total Interest Receipt as % of |
Total |
Total Interest |
Ratio of Total Interest |
|
|
Interest |
Total |
Total Non |
Interest |
payment as % of |
Payments to total |
|
Receipts |
Revenue |
Tax Revenue |
Payments |
total Expenditure |
Interest Receipts |
1947-48 |
27 |
13.6 |
71.05 |
9 |
3.8 |
0.33 |
1971-72 |
699 |
10.1 |
48.8 |
1480 |
23.5 |
2.1 |
1976-77 |
2471 |
12 |
55 |
3657 |
20.2 |
1.5 |
1979-80 |
4029 |
10.5 |
76 |
5070 |
9.3 |
1.3 |
1983-84 (R) |
7439 |
10.3 |
53.4 |
14128 |
14.1 |
2.2 |
1985-86 (R) |
11942 |
133 |
68.4 |
19734 |
14.7 |
2.2 |
1987-88 |
16183 |
13.8 |
68.7 |
33238 |
18.4 |
2.3 |
1988-89 (R) |
18485 |
13.3 |
64.3 |
38132 |
19 |
2.3 |
1989-90 (R) |
20141 |
131.1 |
59.5 |
45291 |
21 |
2.2 |
1990-91 (R) |
24935 |
14 |
64.7 |
54896 |
22.3 |
2.2 |
Interest on Inter government Transactions in Pakistan, 1979-80 to 1990-91Table 2
Year |
Rs. in Million |
Yearly rate |
% of total |
% of Non- |
|
Inter governmental |
of change |
revenue |
Tax Revenue |
|
Interest Receipts |
(Percentage) |
|
|
1979-80 (R) |
2586 |
- |
6.72 |
48.88 |
1980-81 (BK) |
2556, |
-1.2 |
5.44 |
31.34 |
1982-83 CIO |
... .. 3009 |
8.9 |
5.08 |
29.64 |
1983-84 (R) |
3720 |
24 |
5.15 |
36.64 |
1984-85 (R) |
4438 |
!9] |
5.74 |
27.42 |
1985-86 (R) |
6561 |
48 |
7.3 |
37.59 |
1986-87 (R) |
7078 |
7.9 |
6.81 |
33.79 |
1987-88 (R) |
10494 |
48 |
8.97 |
44.53 |
1988-89 (R) |
94 12 |
-10 |
6.77 |
32.71 |
1989-90 (BIO |
10255 |
9 |
6.65 |
30.27 |
1990-91 (BIO |
15072 |
- |
— |
— |
|
|
47 |
8.4 39.13 |
|
Interest Payment to Federal Government by Different Government Agencies in Pakistan, 1976-71 to 1990 1991 Table3 (a)
|
Punjab U) |
Sind (2) |
NWVB (3) |
Ualochlslan (4) |
Total Provinces (5) |
Local Bodies (6) |
Financial Institutions (7) |
All Others (8) |
Grand Total (9) 15+6*7*8! |
|
|
|
|
|
|||||
1970-71 (R) |
60 |
32 |
14 |
6 |
112 |
34 |
|
588” |
734 |
On Cash |
48 |
28 |
12 |
5 |
93 |
|
|
|
|
All Others- |
12 |
4 |
2 |
i |
L_ |
|
|
|
|
|
|||||||||
1979-80 (R) |
1040 |
*410 |
338 |
169 |
1958 |
286 |
304 |
2129" |
4677 |
Cash - |
1023 |
404 |
336 |
168 |
1932 |
25 |
31 |
|
|
All Others |
17 |
6 |
2 |
1 |
26 |
261 |
273 |
|
|
|
|||||||||
1983-84 (R) |
1940 |
921 |
691 |
313 |
3865 |
460 |
245 |
2869- |
3479 |
Cash |
1919 |
902 |
688 |
311 |
382- |
37 |
34 |
|
|
All Others |
»j |
19 |
3 |
2 |
45 |
423 |
211 |
|
|
|
|||||||||
1986-87 (R) |
4226 |
2095 |
1325 |
642 |
8287 |
1025 |
419 |
5609" |
15340 |
Cash |
4158 |
2063 |
1318 |
608 |
8146 |
340 |
22 |
|
|
AU Others |
68 |
32 |
1 7 |
34 |
141 |
685 |
397 |
|
|
|
|||||||||
1988-89 (R) |
4990 |
2113 |
1862 |
82? |
9792 |
647 |
1010 |
7036- |
18485 |
Cash |
4890 |
2077 |
1854 |
723 |
9544 |
38 |
14 |
|
|
All Others |
100 |
36 |
8 |
104 |
248 |
609 |
997 |
|
|
|
|||||||||
1990-91 (R) |
6894 |
2945 |
2576 |
1100 |
13515 |
1414 |
1484 |
8519" |
24932 |
Cash |
6808 |
2902 |
2559 |
1050 |
13319 |
48 |
12 |
|
|
All Others |
. 86 |
<3 |
_ . 17 |
50 |
196 |
1366 |
1472 |
|
|
Percentage Distribution of Interest Paid by Different Agencies to Federal Government in Pakistan, 1970-71 to 1990-91 Table 3 (b)
|
% Share in Total Payment by Provinces
|
% Share in Total Payment by All Agencies including Provinces
|
|
|
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Local |
Financial |
All |
|
|||||||||||||||||||
Year/Loan Type |
Punjab |
Sind |
NWFP |
Balochistan |
Punjab |
Sind |
NWFP |
Balochistan |
Bodies |
Institutions |
Others |
|
|||||||||||||||||||
1970-71 |
53 6 |
28 6] 12 5 |
5 |
8.2 |
4 4 |
19 |
0.82 |
4.6 |
80 1 |
|
|||||||||||||||||||||
Cash |
(51.6). |
(30)., (13) |
(5). |
|
|
|
|
|
j |
|
|||||||||||||||||||||
All Others |
(63 2). |
(21). |
s (10 5) |
(5). |
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
1979-80 |
53 1 |
21 4 |
173 |
8.6 |
22 2 |
8.8 |
7.2 |
3-6 |
6.1 |
6.5 |
45.5 |
|
|||||||||||||||||||
Cash |
(53). |
(21) |
(17 4) |
(87) |
I- |
|
|
|
|
|
|
|
|||||||||||||||||||
All Others |
(654) |
(23). |
(7 7) |
(3 8) |
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
1983-84 |
50.2 |
24 17 9 |
8 |
26.1 |
12 4 |
93 |
4 2 |
6.2 |
3 3 |
38 6 |
|
||||||||||||||||||||
Cash |
(50 2) |
(23 6) |
(18) |
(8) |
|
|
|
|
|
|
|||||||||||||||||||||
All Others |
• (46.7) |
(42) |
(6 7) |
(4 4). |
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
1986-87 |
51 |
253 |
16 |
7.7 |
27.5 |
13.7 |
8 6 |
. 42 |
6.7 |
2.7 |
366 |
|
|||||||||||||||||||
Cash |
(51). |
(25 3) |
(16) |
(7 5). |
“ |
|
|
|
|
|
|
|
|||||||||||||||||||
All Others |
(48). |
(23) |
(5) |
(24.) |
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
i |
|
|
|
|
|
|
|
||||||||||||||||||||||
1988 89 |
51 |
21.6; 19 |
84 |
27 |
11 41 |
10 l |
4 5 |
35 |
5 5 |
38 1 |
|
||||||||||||||||||||
Cash |
(51). |
(22) |
09) |
(7.6T |
|
|
|
|
|
|
|
|
|||||||||||||||||||
All Others |
(40.3) |
(14 5) |
(3) |
(42). |
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
1990-91 |
51 |
2L81 |
19' |
8 |
27.7 |
11.8 |
10.3 |
44 |
5.7 |
6.8 |
34 2 |
|
|||||||||||||||||||
Cash |
(51). |
(22). |
' 09). |
(7.9). |
|
|
|
|
|
|
|
|
|||||||||||||||||||
All Others |
(438). |
(22)1 |
(8.7)1 |
(25 5) |
|
|
|
|
|
|
|
|
|||||||||||||||||||
Classification of Interest Received by Federal Government from Various Agencies (By Category of Loan) 1970-71 to 1990-91 Table 3 (c)
Years |
Punjab |
Sind |
NWFP |
Balochistan |
Total |
Local Bodies |
Financial |
||||||
|
|
|
|
|
|
|
Institutions |
||||||
1970-71 |
|
|
|
|
1 |
||||||||
Cash |
80 |
88 |
86* |
' 83"C 83 |
NAj NA |
||||||||
Others |
T20T |
XT2T |
"TIT |
.(17) .(17); |
|||||||||
|
|||||||||||||
1979-80 |
|
|
|
r |
|
||||||||
Cash |
98 |
99 |
99 |
99 99 |
8-7! 10 |
||||||||
Olliers |
X2) |
"TIT |
0) |
(IT ' ' TT |
(91 3)] (90)' |
||||||||
1983-84 |
|
] J |
- |
||||||||||
Cash |
99 |
99 |
99 b |
99 99: 8 |
13.9 |
||||||||
Others |
ID |
T7 |
TOT |
05 ID| (927 |
6861)1 |
||||||||
|
|
|
|||||||||||
1986-87 |
|
|
|
|
|
|
|
||||||
Cash |
98 |
“981 |
99.5 |
95 |
98 |
33 2 |
53 |
||||||
Others |
~(2) |
12) |
X03) |
" (5) |
021 |
(66.8) |
T94J) |
||||||
1988-89 |
|
|
|
|
|
|
|
||||||
Cash |
98 |
98 |
99T |
87 |
971 |
5 9 |
TT |
||||||
Others |
X2) |
JTJ |
(0.4) |
TT3T |
X3T |
(947)' |
79856) |
||||||
1990-91 |
|
|
|
|
|
|
|
||||||
Cash |
99 |
99 |
99 |
95 |
99 |
TT |
0811 |
||||||
Others |
XU |
TT |
TD |
T5T |
"TIT |
(96.6) |
(99 2) |
||||||
Ans (All Types) by Federal Government f Government's, 1971-72 to 1990-91 Table 4
Years |
GRANTS |
LOANS |
Total Finan. Asstt. |
||||||||
Punjalij |
Sind |
NWFP |
Halo. |
Total |
Punjali |
Sind |
NVm>] |
Halo. |
Total |
||
|
|||||||||||
1971-72 |
71.9 |
12 |
41.2 |
16.7 |
141.8 |
131.7 |
1 50.2! 73 8j 95-9 |
351.6 |
987.7 |
||
1972-73 |
256 |
116.4 |
44.7 |
130 |
548.1 |
1 781.9 345 6 |
•■176.5 |
112.7 |
1416.7 |
2062.6 |
|
1973-74 |
327.6 |
156 |
113.5 |
224.9 |
822 |
1000.1 |
361.6 |
176.7 |
133.3 |
532.5 |
2545 |
|
|
|
|
|
|
|
|
|
|
|
|
1974-75 |
288.3 |
235 4 |
231 |
107.5 |
862.2 |
1202.3 |
570.6 |
443.1 |
. .3441 |
2560 |
3432.9 |
1975-76 |
241.2 |
134.8 |
229.8 |
142.1 |
747.9! 1647.3 |
636.7 |
577.3 |
255.2 |
3116.5 |
3829.4 |
|
1976-77 |
472.5 |
103.8 |
382.6 |
-2<5,8 |
1195.7 1925.5 |
862.2 |
' 596.5 |
290 3 |
3674.5 |
4870.2 |
|
1977-78 |
877.3 |
428.3 |
722 |
379.3 |
2406.9! 1366 |
642.2 |
504.4 |
197.3 |
2709-9 |
5116.8 |
|
1978-79 |
1015.9 |
595.5 |
770.1 |
429 A |
2810.9 |
1633 11 646 |
415.6 |
223.9 |
2918.6 |
5739 5 |
|
1979-80 |
572.8 |
513.3 |
792.2 |
306.5 |
2184.8 |
1535.5; 673.5 |
435.6 |
252.7 |
2897.3 |
5112.1 |
|
1980-81 |
1295 6 |
583.2 |
1043-4 |
ON \J~s cO. ! CC'. |
3258.1 |
124 |
254.8 |
352.6 |
270.7 |
1102.1 |
4360.2 |
|
|
|
|
|
|
|
|
|
|
|
|
1981-82 |
714.9 |
310.91 1203.11 363 5 |
2592.41 — |
— |
|
- |
1 — |
6334.7 |
|||
1982-83 |
2470.7 |
942.5 i 1039-4 |
467 |
4919.6 |
|
|
|
— |
— |
7939.7 |
|
1983-84 |
17152 |
1020 |
1731.8 |
6531 |
5120.1 |
3672.1 |
1082.6 |
888.2 |
402.5 |
6(>4 5.4 |
11166 |
1984-85 |
3192.5 |
1787.3 |
2400.51 983.5 |
8363.8 |
3754 |
1517.9 |
1232.7 |
660.7 |
7165.3 |
15529 |
|
1985-86 |
5001.4 |
2309-2 |
3289.5 |
1561.4 |
12162 |
4 460.5 |
1730.5 |
1410.7 |
803.6 |
8405.7 |
20567 |
|
|
|
|
|
|
|
|
....... |
— |
|
|
1986-87 |
N A |
N A |
N.A |
v A |
N A |
N A1 N.A |
N A j N A |
11362 |
|
||
1987-88 |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
| N.A; N.A |
12606 |
|
|
1988-89 |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
NA |
N.A |
NA |
5876 |
|
1989-90 |
N.A |
N.A |
N.A |
N.A |
N.A |
N.A |
■ h N.A |
| N.A |
N.A |
12657| |
|
1990-91 |
N.A |
1 N.AI N.A |
N A N.A |
N.A |
| N.A) N.A |
N.A |
146.301 |
Cost of Borrowing for Domestic and Foreign Debt in Pakistan Table 6
Year |
Cost of |
Domestic cost |
Foreign cost |
Weighted |
|
Borrowing |
of Borrowing |
of Borrowing |
Cost |
|
% |
% |
% |
|
1980-81 |
3.86 |
5.77 |
2.6 |
” ' 1 3.86 |
1981-82 |
3.84 |
5.68 |
2.35 |
3.84 |
1982-83 |
4.73 |
6.14 |
3.57 |
4.73 |
1983-84 |
5.43 |
6.88 |
4.03 |
5.43 |
1984-85 |
5.4 |
6.79 |
3.98 |
5.4 |
1985-86 |
4.97 |
6.22 |
3.56 |
4.97 |
1986-87 |
5.1 |
6.37 |
3.57 |
5.1 |
1987-88 |
5.95 |
7.77 |
3.62 |
5.95 |
1988-89 |
7.1 |
10.09 |
3.46 |
7.1 |
1989-90 |
6.62 |
9.13 |
3.68 |
6.62 |
1990-91 |
5.26 |
8.11 |
2.84 |
5.26 |
Table 7
Overall Deficit of Pakistan by Provinces 1947 48 to 1990 91
Year |
Overall Deficit |
Federal |
Provincial |
Percent of GDP at |
|
|
(Rs in million) |
|
Market Prices |
1947-48 |
13 |
NA |
NA |
NA |
1960-61 |
-262 |
NA |
NA |
-1.4 |
1969-70 |
-1013 |
NA |
NA |
-2.3 |
1971-72 |
-450 |
NA |
NA |
-0.9 |
1976-77 |
12830 |
NA |
NA |
9-4 |
1978-79 |
17318 |
NA |
NA |
8.9 |
1979-80 |
14663 |
- |
- |
6.3 |
1980-81 |
14618 |
- |
- |
5.3 |
1981-82 |
20992 |
17521 |
3471 |
6.5 |
1982-83 |
25654 |
14046 |
11608 |
7.1 |
1983-84 |
25147 |
10022 |
15125 |
6 |
1984-83 |
36777 |
14330 |
22447 |
7.8 |
1985-86 |
41644 |
12222 |
29422 |
8.1 |
1986-87 |
46710 |
12000 |
34710 |
8.2 |
1987-88 |
57563 |
NA |
NA |
8.5 |
1988-89 |
56879 |
NA |
NA |
7.4 |
1989-90 |
58917 |
NA |
NA |
6.7 |
1990-91 |
58050 |
NA |
NA |
5.9 |
Dr Faiz Muhammad
Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.