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Size of Interest Receipts and Payments: Pakistan

Table 1’ presents estimates of the aggregate interest receipts and payment of the federal and provincial governments. Estimates on the receipts also include intergovernmental transactions which are shown separately in two different tables. In Table 2 we show figures calculated on the basis of a methodological note on intergovernmental interest in the Economic Survey of 1990-91. Tables 3 (a) to 3 (c) provide details of interest payments by different agencies to the federal government taken from the explanatory memoranda on budgets of different years. Unfortunately, the two sets of data do not provide comparable estimates of intergovernmental and intragovemment interest transactions. Yet both sets can be used to view the issue from different angles. Table 4 provides estimates of loans and grants from federal government to provincial governments and other agencies. These estimates can be used to explain the trends in overall and intergovernmental interest receipts. In Table 5 we present data on interest payment by the government on different sources of debt. Composition of domestic debt is detailed in Table 6. We have put all these tables together as they are interrelated and are needed for elaborating the si/.c of interest dealing of the government. Some of the important observations which can be made on these tables are as follows:

  1. Aggregate interest receipts reported in the revenue account of the federal budget has been one of the important sources of total revenue (Table 1). In 1947-48, they were about 14 percent of the total revenue and about 70 percent of the non-tax revenue. Since then in spite of the fact that a number of heads have been added in the list of non-tax revenue, the share of “interest” has continued to remain very high. In the last ten years it has remained around 60 percent of the non-tax revenue or about 13 percent of the total revenue.
  2. Table 3 (a,b and c) enables us to disaggregate the interest receipts of the government. The estimates show that while in 1970-71, the major source of government interest receipts was public sector enterprises (PSEs) and similar other departments contributing about 80 percent of the total, by 1979-80 the scenario was completely changed. Since 1979-80, about 50 percent of the interest receipts of the federal government has come from provincial governments and local bodies. In 1990-91 the share of both the categories went up to 59 percent.
  3. According to the estimates in Table 2 intergovem- ment interest payments constituted about 63 percent of the total interest receipts of the federal government in 1979-80. By 1983-84, this figure came down to 50 percent probably because the federal government started providing relatively more funds to provinces in the form of grant rather than loans (Table 4). In 1990-91, we again see intergovemment interest payments soaring to 60 percent of the total receipts by the federal government. This is usually attributed to two reasons:
  • Better recovery rate
  • Increase in domestic cost of borrowing which was almost doubled between 1980-81 and 1990- 91 (see Table 7).
  1. From Tables 3 (a) and 3 (c) we may also see that the major head on which the provinces paid interest to die federal government was cash loans (83 to 99 percent) whereas for local bodies and financial institutions the major head (90 to 99 percent) was other loans (mainly foreign loans). Unfortunately, it is not clear from the available data what is the source of cash loans. But the fact that other loans including foreign loans, USAID local currency loans and German loans point out that cash loans must have been raised from domestic sources. If this is so then it should have profound implications for eliminating interest on intergovemment transactions. We shall discuss this in the next section.
  2. An interesting feature of estimates in Table 3 is that while the interest payments by provinces to the federal government increased by about 67 times between 1979-80 to 1990-91 for financial institutions, this increase was only about five times and for ‘all others’ the increase was only four times in the corresponding period. This, in our view, has distributional and efficiency implications for the economy which we shall examine after analysing the estimates on ‘interest payments by the government.’

Total Interest Receipts and Payments by Govt of Pakistan (Selected Years)Table 1


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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 1990-91 Table 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 1991Table3 (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 1990-91Table 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 1990-91Table 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

Dr Faiz Muhammad

 

Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.