ISLAMABAD: Pakistan's total public debt was recorded at Rs 35.207 trillion at end March 2020 compared with Rs 32.708 trillion at end June 2019, registering an increase of Rs 2.499 trillion during the first nine month of current fiscal year, revealed Economic Survey (2019-20).
The survey noted that the country' external debt and liabilities (EDL) reached $110 billion by end March 2020, registering an increase of $3.6 billion during first nine months of 2019-20.
The main components of this increase were: (i) external public debt stock increased by $3 billion. Debt from multilateral and bilateral sources increased by $2.3 billion which were mostly contracted on concessional terms (low cost and longer tenor); (ii) stock of commercial loans/Eurobonds registered a decrease of $0.7 billion; (iii) non-resident investment in government securities was recorded at $1.4 billion; (iv) SBP foreign exchange liabilities decreased by $0.6 billion mainly due to repayment of Qatar deposit; (v) PSEs debt decreased by $ 0.5 billion; and (vi) External borrowing by the private sector is a healthy sign indicating the private sector's capacity to borrow for local investments.
Private sector debt and liabilities increased by $ 1.7 billion.
Gross external loan disbursements recorded at $8.017 billion during first nine months of 2019-20, which are as follows: (i) disbursements from multilateral sources (including IMF) amounted to $4.839 billion and accounted for 60 percent of the total disbursements, out of which ADB and IMF were the main contributors; (ii) disbursements from bilateral sources stood at $1.305 billion. Out of this total, disbursements from Saudi Arabia and China were $ 720 million and $ 460 million, respectively; and (iii) commercial loans contributed $ 1.873 billion in external public debt disbursements.
In wake of the outbreak of pandemic Covid-19, Pakistan has secured $1,386 million under IMF's Rapid Financing Instrument (RFI) facility in order to counter the negative impacts of the outbreak on the economy by increasing social sector spending.
External public debt repayments were recorded at $5,537 billion during first nine months of the current fiscal year compared with $4.138 billion during the same period last year. Repayment of Eurobonds amounting to $ 1,000 million and higher repayments to the IMF mainly contributed towards this increase in repayments during the period. Interest payments stood at $1,579 million during first nine months of current fiscal year.
Economic Survey further stated that federal government borrowing for financing of its deficit was Rs 2.080 trillion. This differential is mainly attributable to depreciation of Pak Rupee, increase in cash balances of the federal government and difference between face value (which is used for recording of debt) and the realized value (which is recorded as budgetary receipt) of PIBs issued during the period.
Total public debt to GDP ratio reached 72.1 percent while total debt of the government to GDP was 66.5 percent at end of 2017-18. Total public debt and total debt of the government as percentage of GDP stood at 86.1 percent and 77.7 percent respectively at end June 2019 thus, increasing further during 2018-19.
Apart from fiscal deficit, unprecedented revaluation loss on account of currency depreciation and build-up of liquidity buffer contributed significantly towards the increase in debt-to-GDP ratio during 2018-19.
The Covid-19 shock is expected to result in higher than anticipated Debt to-GDP ratio mainly due to the sharp decline in growth and the increase in budget deficit.
External public debt to GDP ratio increased to 26.3 percent at end June 2019 compared with 22.3 percent at end June 2018, depicting increased external debt burden. Apart from increase in external public debt stock, reduction in GDP size in US Dollar terms contributed towards increase in this ratio. At end March 2019, this ratio increased and recorded at 29 percent primarily due to moderate growth in external public debt and further reduction in GDP size in US Dollar terms.
Domestic debt was recorded at Rs 22.478 trillion at end March 2020. Permanent debt constituted 59 percent of domestic debt portfolio and recorded at Rs 13,251 billion at end March 2020, representing an increase of Rs 1,164 billion during first nine months of ongoing fiscal year. The bifurcation of this increase reveals that government net mobilization through issuance of PIBs was Rs 1,321 billion while a net retirement amounting to Rs 157 billion was witnessed in Prize Bonds.
Floating debt was recorded at Rs 5,771 billion or around 26 percent of total domestic debt portfolio at end March 2020. During first nine months of this fiscal year, the government net mobilization through issuance of T-bills was Rs 556 billion while government retired Rs 286 billion against SBP debt.
The stock of unfunded debt stood at Rs 3.455 trillion at end March 2020, constituted around 15 percent of total domestic debt portfolio. Unfunded debt recorded net mobilization of Rs 311 billion during first nine months of current fiscal year compared with Rs 228 billion mobilized during the same period last year. Most of the incremental mobilization came from Defence Saving Certificates (Rs 93 billion), Bahbood Savings Certificates (Rs 78 billion) and Regular Income Certificates (Rs 72 billion).
Interest servicing was recorded at Rs 1,880 billion during first nine months of current fiscal year against the annual budgeted estimate of Rs 2,891 billion. Domestic interest payments recorded at Rs 1,646 billion and constituted around 88 percent of total interest servicing during first nine months of current fiscal which is attributable to higher volume of domestic debt in total public debt portfolio.
External loans are contracted in various currencies; however, disbursements are effectively converted into Pak Rupee. Since Pak Rupee is not an internationally traded currency, other international currencies are bought and sold via selling and buying of US Dollar. Hence, the currency exposure of foreign debt originates from two sources: US Dollar/other foreign currencies and Pak Rupee/US Dollar. Any movement in international currencies (in which debt is contracted) and PKR vis-à-vis US Dollar can change the dollar and Pak Rupee value of external debt respectively. Domestic debt does not carry currency risk since it is denominated in Pak Rupee.
In addition to net external inflows, following factors influenced the movement in external public debt stock during first nine months of current fiscal year: In US Dollar terms, revaluation gain owing to appreciation of US Dollar against other international currencies reduced the external public debt by around US$ 0.8 billion; external public debt recorded an increase of 4 percent in US Dollar terms. However, Pak Rupee depreciated by 2 percent against US Dollar during first nine months of current fiscal year, which led to 6 percent increase in external public debt when reported in Pak Rupee terms.
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