Pace of domestic debt accumulation accelerates

KARACHI: The pace of domestic debt accumulation further accelerated by 6 percent during this fiscal year (FY23) and reached an all-time high level of Rs 33 trillion mark end of November 2022.

According to the State Bank of Pakistan (SBP), the government’s domestic debt rose by 6 percent during the first five months of this fiscal year. Total domestic debt stocks reached historical level of Rs 32.929 trillion at the end of Nov 22 compared to Rs 31.037 trillion in June 22, depicting an increase of Rs 1.9 trillion.

Year on Year basis, the country’s total debt surged by 23 percent or Rs 6 trillion, as it was Rs 26.827 trillion in Nov 21.

For the past one year, the country is facing a serious financial crunch that forced the federal government to obtain fresh loans from domestic, as well as, from external resources to meet its financial needs.

Govt debt stocks hit historic high of Rs50.152trn

The recent increase in debt burden emanated from higher fiscal and current account deficit.

Within domestic sources, the government mainly relied on commercial banks to adhere to its commitment of zero fresh borrowing from SBP in line with the SBP Act.

The detailed analysis revealed that, during the period under review, a major increase was witnessed in the permanent debt, which posted a 10 percent growth.

The country’s permanent debt surged to Rs 22.926 trillion in Nov 22 up from Rs 20.844 trillion in June 22. This includes federal government and provincial government borrowing, Pakistan Investment Bonds (PIBs), GOP Ijara Sukuk, prize bonds, and Bai-Muajjal of Sukuk.

Similarly, the upward trend was also seen in the floating debt, which went up by Rs 457 billion during July-Nov of this fiscal year and stood at Rs 6.85 trillion end of Nov 22. This debt includes Market Treasury Bills and Bai Muajjal.

However, the country’s unfunded debt stocks witnessed 7 percent decline during July-Nov of FY23. Unfunded debt declined to Rs 3.098 trillion in Nov 22 as against Rs 3.336 trillion in June 22.

In addition, during the period under review, the country’s total liabilities declined from Rs 772 billion in June 22 to Rs 666 billion in Nov 22.

Copyright Business Recorder, 2023