ISLAMABAD   -   Pakistan’s public debt and liabilities are rapidly increasing as they touched Rs35.09 trillion by end-March 2019.

The successive governments are continuously borrowing to meet the twin deficits including budget and current account deficits. Pakistan total debt and liabilities were Rs6.69 trillion in 2008, when General Pervaiz Musharraf left the government. Later, the debt enhanced to Rs16.34 trillion in 2013 when Pakistan People’s Party (PPP) completed its five years tenure. In 2018, it had touched Rs29.88 trillion when previous PML-N government completed its tenure. However, it had gone up to Rs35.09 trillion in last ten months when incumbent government is in power.

Total public debt as percentage of GDP stood at 72.1 percent while total debt of the government recorded at 66.5 percent at end June 2018. Thus, these indictors remained significantly higher than the 60 percent threshold as envisaged under FRDL Act, 2005. Total public debt to GDP ratio further increased and recorded at 74.2 percent of GDP at end March 2019. Apart from higher fiscal deficit, depreciation of Pak Rupee against US Dollar has contributed to this increase during first nine months of current fiscal year.

Public debt servicing was recorded at Rs 1,975 billion during first nine months of current fiscal year against the annual budgeted estimate of Rs 2,396 billion. Domestic interest payments constituted around 65 percent of total debt servicing due to higher volume of domestic debt in total public debt portfolio. Domestic interest payments were recorded at Rs 1,277 billion during first nine months of current fiscal year primarily driven by payments made against Market Related Treasury Bills (Rs299 billion), Treasury Bills (Rs 290 billion), National Savings Schemes (Rs 272 billion) and Pakistan Investment Bonds (Rs 268 billion).

Domestic debt stock was recorded at Rs 18,171 billion at end March 2019. During first nine months of current fiscal year, the government relied mainly on domestic sources to finance its fiscal deficit. Consequently, domestic debt witnessed an increase of Rs 1,754 billion while government borrowing from domestic sources for financing fiscal deficit was Rs 1,398 billion. This differential is mainly attributed to increase in government credit balances with the banking system. Most of the increase in domestic debt came from short term floating debt while net mobilization from permanent debt and unfunded debt remained limited during first nine months of current fiscal year. Cumulatively, the government mostly borrowed from State Bank of Pakistan (SBP) and retired portion of its debt to commercial banks.

According to the Economic Survey, during first nine month of current fiscal year, EDL recorded an increase of US$ 10.6 billion to stand at US$ 105.8 billion at end March 2019 out of which public debt was US$ 74.2 billion. External public debt increased by around US$ 3.9 billion during first nine months of current fiscal year compared with the increase of US$ 6.7 billion witnessed during the same period last year. Borrowing from commercial sources (foreign commercial banks and Eurobonds/Sukuks) have relatively increased during the last few years, however, external public debt still largely comprises multilateral and bilateral sources which cumulatively constituted 78 percent of external public debt portfolio at end March 2019. These multilateral and bilateral loans are contracted at concessional terms (low cost and longer tenor) and are primarily utilized to remove structural growth anomalies and promote reform in the areas of energy, taxation, business, trade and education.

During first nine months of the current fiscal year, servicing of external public debt was recorded at US$ 5,608 million. Segregation of this aggregate number shows repayment of US$ 4,139 million towards maturing external public debt stock while interest payments were US$ 1,470 million.