Punjab Debt Sustainability Analysis

Punjab is Pakistan's most populous and economically vibrant province. Its fiscal health, therefore, is crucial to the fiscal stability and economic development of Pakistan as a whole. By end-June 2011, Punjab's outstanding debt stood at Rs. 413 billion, or 4.0 percent of Gross Subnational Domestic Product (GSDP). The low debt level is perhaps not surprising given the historical barriers to borrowing imposed at the federal level. But this has changed profoundly with enactment of the 18th Constitutional Amendment which has allowed provinces to borrow domestically and externally, subject to limits imposed by National Economic Council (NEC). This change has heightened the need to examine what Punjab owes and the question of provincial debt sustainability in general. As there is no threshold defined for subnational debt levels, this sustainability analysis considers unsustainable fiscal policies and borrowing strategy to be those that lead to an explosive accumulation of debt such that it would jeopardize the normal provision of services by the province. The analysis projects the debt outlook through the fiscal years 2012 to 2021, using the Government of Punjab's current Medium-Term Fiscal Framework (MTFF) as the base. The MTFF for fiscal 2012 anticipates fiscal surpluses in medium term, driven mainly by an improvement in provincial finances due to a favorable Seventh National Finance Commission Award, and thus concludes that the debt outlook is sustainable through fiscal 2021: the debt-to-GSDP ratio gradually declines over the next 10 years, to 1.2 percent, from 4.0 percent; the interest payments-to-revenues ratio decreases to 0.9 percent, from 3.0 percent; while the debt service-to-revenues ratio rises by a modest 0.3 percent to 3.3 percent. The analysis then explores some potential vulnerability to economic and fiscal shocks. Punjab's debt sustainability to be fairly robust to most shocks, except when the individual shocks are combined. However, the probability of combined shock remains very low.

Bibliographic Details

Main Authors:	Manoel, Alvaro, Refaqat, Saadia, Onder, Harun, Ashraf, Mehwish
Language:	English en_US
Published:	World Bank, Washington, DC 2012-10
Subjects:	ACCOUNTING, ACCUMULATION OF DEBT, AMOUNT OF LOANS, ARBITRATION, BAILOUT, BAILOUTS, BALANCE OF PAYMENTS, BANK POLICY, BANKRUPTCY, BENEFICIARIES, BOND, BOND ISSUE, BORROWING STRATEGY, BUDGET CONSTRAINT, BUDGET CONSTRAINTS, CAPITALIZATION, CENTRAL GOVERNMENT, CONSTITUTIONAL AMENDMENT, CONTINGENT LIABILITIES, CONTINGENT LIABILITY, COUNTRY DEBT, CREDITOR, CURRENCY, CURRENCY COMPOSITION, DEBT, DEBT BURDEN, DEBT CRISES, DEBT LEVEL, DEBT LEVELS, DEBT MANAGEMENT, DEBT SERVICE, DEBT SERVICES, DEBT SERVICING, DEBT SERVICING COST, DEBT STOCK, DEBTS, DECENTRALIZATION, DEFICITS, DEVALUATION, DEVELOPMENT BANK, DEVELOPMENT EXPENDITURES, DISTRICT, DISTRICT GOVERNMENTS, DOMESTIC CURRENCY, DOMESTIC DEBT, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, EXCHANGE RATE, EXCHANGE RATES, EXPANSIONARY FISCAL POLICIES, EXPENDITURE, EXPENDITURE PROGRAMS, EXPENDITURE PROJECTIONS, EXPENDITURES, EXTERNAL BORROWING, EXTERNAL DEBT, EXTERNAL FINANCING, FEDERAL ADMINISTRATIONS, FEDERAL COUNTRIES, FEDERAL DEBT, FEDERAL GRANTS, FEDERAL INTERVENTION, FEDERAL LAW, FEDERAL POLICIES, FEDERAL REVENUE, FEDERAL TRANSFERS, FEDERAL-PROVINCIAL, FINANCES, FINANCIAL OBLIGATIONS, FISCAL ACCOUNTS, FISCAL ADJUSTMENT, FISCAL BALANCE, FISCAL BALANCES, FISCAL CRISIS, FISCAL DISCIPLINE, FISCAL FEDERALISM, FISCAL FRAMEWORK, FISCAL IMPACT, FISCAL PERFORMANCE, FISCAL POLICIES, FISCAL POLICY, FISCAL SPACE, FISCAL STABILITY, FISCAL SURPLUSES, FISCAL SUSTAINABILITY, FIXED INTEREST, FIXED INTEREST RATES, FOREIGN CURRENCY, FOREIGN CURRENCY RISK, FOREIGN DEBT, FOREIGN EXCHANGE, FOREIGN LOAN, FOREIGN LOANS, GOVERNMENT ASSETS, GOVERNMENT BONDS, GOVERNMENT SPENDING, HOLDING, IMMOVABLE PROPERTY, INCOME TAX, INDEBTEDNESS, INFLATION, INFLATION RATE, INFLATION RATES, INFRASTRUCTURE DEVELOPMENT, INFRASTRUCTURE FINANCING, INITIAL DEBT, INSTITUTIONAL CAPACITY, INTEREST INCOME, INTEREST PAYMENT, INTEREST PAYMENTS, INTEREST RATE, INTERGOVERNMENTAL FISCAL RELATIONS, INTERGOVERNMENTAL TRANSFERS, INTERNATIONAL BANK, ISSUANCE, LENDERS, LEVEL OF GOVERNMENT, LIABILITY, LIQUIDATION, LIQUIDITY MANAGEMENT, LOAN, LOAN AMOUNT, LOAN PORTFOLIO, LONG-TERM MATURITIES, MACROECONOMIC ADJUSTMENT, MACROECONOMIC FRAMEWORK, MACROECONOMIC MANAGEMENT, MATURITY, MEDIUM TERM FISCAL FRAMEWORK, MEDIUM-TERM FISCAL, MONETARY FUND, MORAL HAZARD, MUNICIPALITIES, NATIONAL FINANCE, NATIONAL TREASURY, NATURAL DISASTERS, NET CURRENT REVENUE, NET CURRENT REVENUES, NET DEBT, OUTSTANDING AMOUNT, OUTSTANDING DEBT, OUTSTANDING LOAN, OVERDRAFT, OVERDRAFT FACILITY, PENSION, PENSION FUND, PENSIONS, POLICY ACTIONS, POLICY ADJUSTMENT, POLICY ENVIRONMENT, POLICY INDICATORS, POLICY REPORT, PORTFOLIO, POSITIVE DEBT, PRICE VALUES, PRINCIPAL REPAYMENTS, PRIVATIZATION, PROPERTY TAX, PROVINCE, PROVINCES, PROVINCIAL ACCESS, PROVINCIAL BORROWING, PROVINCIAL BUDGET, PROVINCIAL DEBT, PROVINCIAL DEVELOPMENT, PROVINCIAL ECONOMIES, PROVINCIAL ECONOMY, PROVINCIAL EXPENDITURE, PROVINCIAL FINANCES, PROVINCIAL GOVERNMENT, PROVINCIAL GOVERNMENTS, PROVINCIAL LEVEL, PROVINCIAL SHARE, PROVINCIAL SHARES, PROVINCIAL TAX, PUBLIC DEBT, PUBLIC FINANCES, PUBLIC INVESTMENT, REAL INTEREST, REAL INTEREST RATE, RECEIPTS, RECURRENT EXPENDITURE, RECURRENT EXPENDITURES, REGULATORY AUTHORITIES, RENEGOTIATION, REVENUE SHARING, REVENUE SHARING FORMULA, SAFETY NETS, SHORT-TERM LIQUIDITY, SOCIAL WELFARE, SOLVENCY, STAMP DUTIES, STATE BANK, STATE GOVERNMENTS, STRUCTURAL PROBLEMS, STRUCTURAL REFORMS, SUBNATIONAL, SUBNATIONAL DEBT, SUBNATIONAL GOVERNMENT, SUBNATIONAL GOVERNMENTS, TAX, TAX BASE, TAX BASES, TAX COLLECTION, TAX EFFORT, TAX POLICY, TAX RATE, TAX RATES, TAX REVENUE, TAX REVENUES, TAXATION, TAXIS, TOTAL DEBT, TOTAL EXPENDITURE, TOTAL EXPENDITURES, TOTAL PROVINCIAL REVENUES, TOTAL PUBLIC EXPENDITURES, TRANCHES, TRANSPARENCY, TREASURY, TREASURY BILL, TREASURY BILL RATE, VALUATION, WARRANTS,
Online Access:	http://documents.worldbank.org/curated/en/2012/10/19309508/punjab-debt-sustainability-analysis https://hdl.handle.net/10986/17877
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