Govt debt stocks hit historic high of Rs64trn by Aug-end

KARACHI: The federal government’s total debt (domestic and external) stocks continued upward journey, reaching historic mark of Rs 64 trillion by the end of August 2023, mainly due to exchange rate volatility.

The State Bank of Pakistan (SBP) on Thursday reported that the central government’s total domestic and external debt stocks rose by 5 percent during the first two months of this fiscal year (FY24).

Cumulatively, the central government’s total domestic and external debt stocks rose to historic level of Rs 63.966 trillion at the end of August 2023 compared to Rs 60.839 trillion in June 2023, depicting an increase of Rs 3.127 trillion.

Govt debt stocks soar to record Rs57trn by Mar-end: SBP

Analysts said that the debt burden is gradually increasing because of insufficient tax revenue collection that forced the government to borrow from the domestic and external resources to finance the soaring fiscal deficit.

For the past one and half year, the country is facing a serious financial crunch and continually relying on borrowing to meet its financial needs.

The detailed analysis revealed that, during the period under review, the major increase was witnessed in the external debt, which rose by 10 percent or Rs 2.144 trillion. The federal government’s external debt surged to Rs 24.175 trillion in August 2023 up from Rs 22.031 trillion in June 2023. External debt included Rs 24.106 trillion of long-term debt and Rs 69 billion of short-term loans.

The massive exchange rate volatility and Pak Rupee depreciation against the dollar has largely contributed to the external debt surge. According to State Bank, the US dollar exchange rate was Rs 305.6174 in August 2023 as against Rs 286.3905 in June 2023.

Similarly, the upward trend was also seen in the federal government’s domestic debt, which went up by 2.5 percent or Rs 983 billion during the first two months of this fiscal year. With the current surge, the government’s domestic debt stocks reached Rs 39.792 trillion in August 2023 as against Rs 38.809 trillion in June 2023.

The total domestic debt is composed of Rs 26.67 trillion permanent debt, Rs 2.933 trillion unfunded debt and Rs 9.633 trillion floating.

Copyright Business Recorder, 2023