Public debt swells to Rs50.9tr in November

KARACHI: Pakistan’s public debt increased 24.2 percent year-on-year to Rs50.9 trillion in November 2022, the central bank data showed on Thursday, courtesy of government’s increasing borrowing needs to meet the budget deficit and lack of external financing in the country.

The debt stood at Rs40.9 trillion as of November 30, 2021, increasing by 1.5 percent or Rs752 billion month-on-month. In October 2022, the debt was Rs50.1 trillion, while it had stood at Rs47.784 trillion at the end of June 2022.

One of the main challenges the government faces, according to analysts, is managing its debt obligations.

Increasing borrowing requirements to meet the budget deficit and a lack of external financing have led to an increase in the public debt. Debt servicing is one of the factors contributing to the nation's rising external and fiscal commitments.

The rupee's decline versus the dollar affects the costs of foreign borrowing. According to analysts, local borrowing costs also rise with an increase in interest rates.

A major portion of the public debt sourced from the domestic debt, which stood at Rs32.9 trillion in November 2022, compared with Rs26.8 trillion a year ago.

The State Bank of Pakistan’s data showed that long-term debt rose to Rs26 trillion in November 2022, from Rs21 trillion a year earlier. The short-term debt was Rs6.8 trillion, compared with Rs5.8 trillion by the end of November 2021.

The external debt surged 27.1 percent to Rs18 trillion from Rs14 trillion.

Analysts said the country was facing fiscal slippages, which might increase the borrowing requirements of the government.

The tax collection stood at Rs2.7 trillion in five months of the current fiscal year wherein, the Federal Board of Revenue has also issued refunds to the tune of Rs135 billion. Overall, the government has to collect Rs8.3 trillion in taxes for FY2023.

Floods and the ongoing economic slowdown, especially curtailment of imports are expected to make matters worse, according to report from Taurus Securities.

“Firstly, due to record inflation and flood related expenditure, the target for provincial cash surplus is most likely to be missed. Secondly, slowdown in consumer spending and lower imports is also expected to hit collection of indirect taxes—the largest contributor to tax revenue,” it said.

A delay in imposition of petroleum development levy (PDL) and a drop in the consumption of petroleum products might also result in missing the Rs855 billion PDL collection target, the report stated.

Moreover, higher subsidy commitments including for food, fertiliser, power (agriculture, life-line consumers, export sector), Kissan Package etc. along with cash handouts to those affected by the floods is expected to increase current expenditure.

The report expects the fiscal deficit to be 5.8 percent of gross domestic product (GDP) in FY2023. The deficit clocked-in at 1 percent of the GDP in the first quarter of the current fiscal year.