ISLAMABAD

Pakistan's public debt went up to Rs. 18,143 billion at the end September 2015, registering an increase of Rs. 762 billion during first quarter (July-September) of 2015-16.

The major portion of the public debt is of domestic debt, which stood at Rs12, 718 billion while external debt is Rs5, 424 billion. According to the Debt Policy Statement (DPS) 2015-2016 released by Ministry of Finance, external public debt increased by $1 billion during July-September and recorded at $51.9 billion.

The DPS stated that Pakistan would have to make hefty repayments to the International Financial Institutions in next couple of years. The maturity of 10 years Eurobonds issued in 2005-06 (US$ 500 million) and 2006-07 (US$ 750 million) is due in 2015-16 and 2016-17 respectively. Similarly, the repayment of on-going EFF (Extended Fund Facility) worth of $6.64 billion with IMF will begin in 2017-18. The repayment of rescheduled Paris Club debt under Official Development Assistance (ODA) will start from 2016-17.

According to the report the 5-year Eurobond issued in April 2014 (US$ 1 billion) will mature in 2018-19 and the 5-years Pakistan International Sukuk issued in November 2014 (US$ 1 billion) will mature in 2019-20.

The external debt increased due to $515 million commercial loans and $500 million Eurobonds. In addition, 8th tranche under IMF Extended Fund Facility (EFF) added $497 million in external public debt. An amount of $910 million was repaid during the first quarter of 2015-16. In Pak Rupee terms, the depreciation of Pak Rupee against US Dollar by 2.7 percent during first quarter of 2015-16 contributed further increase in external public debt.

Meanwhile, the domestic debt has enhanced by Rs520 billion to Rs12,718 billion during July-September of the current fiscal year. Meanwhile, the government borrowing for fiscal deficit was Rs273 billion during July-September. During first quarter of 2015-16, the government mobilized more through the net issuance of T-bills (Rs434 billion) followed by PIBs (Rs55 billion) and NSS (Rs54 billion) while the stock of MRTBs was retired by Rs58 billion.

According to the DPS, Pakistan's External Debt and Liabilities (EDL), which include all foreign currency debt contracted by the public and private sector as well as foreign exchange liabilities of SBP, was recorded at $65.1 billion as at end June 2015 out of which external public debt worth $50.9 billion. Despite significant amount of disbursements by IFIs (International Financial Institutions) and mobilization of US$ 1 billion through issuance of Pakistan International Sukuk, public external debt witnessed a decline of US$ 425 million during 2014-15 primarily due to repayments and revaluation gain on account of appreciation of US Dollar against other major currencies.

Meanwhile, the public debt was Rs17,381 billion or 63.5 percent of GDP as at end-June 2015 compared with 63.8 percent during the same period last year. This reduction in public debt to GDP ratio is mainly attributed to improvement in fiscal and current account balances and revaluation gain on external public debt portfolio. In the next three years, this ratio is projected to fall to less than 60 percent in accordance with the provisions of the Fiscal Responsibility and Debt Limitation Act, 2005 as a result of continued fiscal adjustment and prudent debt management.

According to the report, public debt servicing was recorded at Rs1,589 billion against the annual budgeted estimate of Rs1,686 billion during previous financial year 2014-15. Public debt servicing consumed nearly 40 percent of total revenues during 2014-15. Ideally, this ratio should be below 30 percent to allow government to allocate more resources towards development and social sectors.

Meanwhile, public external debt servicing witnessed a decline of 25 percent during 2014-15 and recorded at US$ 4,475 million as compared with US$ 5,995 million in the last fiscal year. The decline in external debt servicing during 2014-15 was mainly due to lower repayments to the IMF that peaked out in 2013-14.