ISLAMABAD: External public debt was recorded at $85.2 billion at the end of March 2023, revealing a decrease of around $3.7 billion during the first nine months of the current fiscal year, given in the Economic Survey 2022-23, however, it does not contain liabilities of foreign exchange, public sector enterprises (PSEs), banks, and private sector.
According to the State Bank of Pakistan (SBP) data, total external debt liabilities stood at $125.726 billion by March 2023 which contains, government external debt, short term, from the International Monetary Fund (IMF) as well as liabilities of foreign exchange, public sector enterprises, banks and private sector.
It was $130.320 billion by end June 2022, as per the SBP data.
The survey noted that Pakistan’s total public debt was recorded at Rs59,247 billion at the end-March 2023, registering an increase of Rs10,005 billion during the first nine months of the current fiscal year.
The survey noted that the increase of Rs10,005 billion during the first nine months of the current fiscal year was much higher when compared with the increase of Rs4,517 billion witnessed during the same period last year.
The Rs10,005 billion include Rs (48) billion of federal primary deficit, Rs3,582 billion interest on debt, Rs7,170 billion on currency depreciation and Rs (699) billion on the government cash balance.
Apart from the financing of fiscal deficit, the depreciation of Pak-Rupee vis-a-vis US dollar by around 39 per cent led to a significant increase in the stock of external public debt when converted into Pak-Rupee, the survey noted.
External public debt was recorded at $85.2 billion at end-March 2023, revealing a decrease of around $3.7 billion during the first nine months of the current fiscal year. This decrease reveals that (i) The debt stock of multilateral sources increased by $2.3 billion.
The main gross inflows included $1.1 billion from the IMF program, $1.5 billion from the ADB’s BRACE program, $1.1 billion from the World Bank and $0.5 billion from the AIIB, (ii) bilateral debt stock decreased by $0.9 billion; (iii) the debt stock of commercial loans registered a net decrease of around $ 3.7 billion.
The gross repayment to foreign commercial banks was US$ 4.5 billion, out of which, $ 0.7 billion was refinanced by China Development Bank (CDB); (iv) government repaid $1.0 billion of international sukuk in December 2022; (v) The stock of Pakistan Banao Certificates, Naya Pakistan Certificates, and non-resident investment in Government securities (T-bills and PIBs) cumulatively decreased by $ 0.4 billion.
Gross external loan disbursements were recorded at $7,032 million during the first nine months of fiscal year 2023 including disbursements from multilateral sources amounted to $5,137 million and accounted for 73 per cent of the total disbursements.
The main contributors were Asian Development Bank (ADB) – $1,939 million, World Bank – $1,218 million, and IMF – $1,166 million; bilateral sources contributed $995 million or 14 per cent in total disbursements. Out of this, the Saudi Oil Facility constituted around $883 million; Commercial loans contributed $900 million in total disbursements, mainly representing refinancing of commercial loans.
External public debt repayments were recorded at $11,400 million during the first nine months of fiscal year 2023 as compared with $8,139 million during the same period last year. This increase in repayments is primarily due to (i) resumption of debt repayment to bilateral creditors, which were deferred under Debt Service Suspension Initiative (DSSI), (ii) US$ 1,000 million International Sukuk maturity in Dec 2022, and (iii) higher repayment of commercial loans i.e., bank loans and other short-term credits.
Government rolled-over US$ 3,000 million deposits each from China and Saudi Arabia which were utilized towards budgetary support. Saudi oil facility amounting to around US$ 900 million was utilized (around US$ 100 million each month); Government repaid international commercial loans to the tune of US$ 5,541 million, out of which US$ 4,541 million were bank loans, whereas US$ 1,000 million was international Sukuk maturity.
The survey noted that 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 the US dollar.
Hence, the currency exposure of foreign debt originates from two sources: US dollar/other foreign currencies and Pak rupee/US dollar. Thus, 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. It must, however, be taken into account that domestic debt does not carry currency risk since it is denominated in Pak rupee.
In addition to net external inflows, the following factors influenced the movement in external public debt stock during the first nine months of the current fiscal year: (i) In US dollar terms, revaluation losses owing to the depreciation of the US dollar against other international currencies increased the external public debt stock by around US$470 million.
This increase was mainly driven by the depreciation of the US dollar against Euro by four per cent, Japanese Yen by two per cent, Pound Sterling by two per cent, and Special Drawing Right (SDR) by one per cent; (ii) The above-mentioned translational loss on account of the depreciation of the US dollar against other international currencies added further to the depreciation of the Pak rupee against US dollar by around 39 per cent which led to an increase the Rupee value of external debt by around Rs6.8 trillion.
Domestic debt was recorded at Rs35,076 billion at the end-March 2023, registering an increase of Rs3,991 billion during the first nine months of the current fiscal year.
Permanent debt mainly comprises medium- to long-term instruments such as the PIBs, Government Ijara Sukuks (GIS), and prize bonds. Permanent debt constituted 71 per cent of the domestic debt portfolio and was recorded at Rs24,885 billion at end-March 2023, representing an increase of Rs4,507 billion during the first nine months of the ongoing fiscal year. The bifurcation of this increase reveals that government net mobilisation through the issuance of PIBs and GIS was Rs4,096 billion and Rs401 billion respectively.
Floating debt was recorded at Rs6,295 billion or around 18 per cent of the total domestic debt portfolio at the end-March 2023. During the first nine months of the ongoing fiscal year, a reduction of Rs522 billion was witnessed in the stock of T-bills.
The stock of unfunded debt stood at Rs2,998 billion at end-March 2023, constituting around nine per cent of the total domestic debt portfolio. Unfunded debt recorded a net reduction of Rs338 billion during the first nine months of the current fiscal year.
Copyright Business Recorder, 2023