Public debt increases to Rs71.6tr as of December

KARACHI: Pakistan’s government debt increased by Rs2.73 trillion, or 4.0 per cent, reaching Rs71.6 trillion in the first six months of the current fiscal year, according to figures released by the State Bank of Pakistan (SBP) on Friday.

As of June 30, 2024, the debt stood at Rs68.91 trillion. By the end of December, the federal government’s total debt stock had risen by 1.8 per cent month-on-month (MoM) and 9.9 per cent year-on-year (YoY).

Analysts noted that the primary reason for the increase in government debt was the higher domestic borrowing requirements than its revenue.

“The government continued its focus on long-term debt, with permanent debt increasing by 22.5 per cent YoY, mainly due to a sharp rise in federal government bonds. Short-term debt also saw an uptick MoM, rising by 2.8 per cent, indicating ongoing liquidity management,” said Saad Hanif, head of research at Ismail Iqbal Securities.

“Meanwhile, external debt declined 3.7 per cent YoY, supported by a relatively stable exchange rate. This strategic shift toward long-term borrowing could help mitigate refinancing risks, but the overall debt burden continues to rise,” Hanif added.

The SBP’s data showed that the domestic debt rose by 5.8 per cent, reaching Rs49.88 trillion during July to December FY25, up from Rs47.16 trillion a year earlier. The domestic debt represents a 17.1 per cent increase YoY and a 2.7 per cent rise MoM at the end of December.

Similarly, the central government’s external debt stood at Rs21.76 trillion in the first half of FY25, compared with $21.75 trillion, reflecting a stable trend. However, the foreign debt fell by 3.7 per cent YoY and 0.1 per cent MoM at the end of December.

“Central government debt increased due to increased expenses requirements of the government compared to its revenue. Importantly, the government increased exposure in long-term debt while retiring short-term debt,” said Awais Ashraf, the director of research at AKD Securities Limited.

“On top of this, external debt slightly declined during the month due to a better current account position and the purchase of dollars by SBP from the open market,” Ashraf added.

Pakistan recorded a budget deficit of 2.8 per cent of GDP, amounting to Rs3.4 trillion, during the second quarter of FY25. This brings the total deficit for the first half of FY25 to 1.2 per cent of GDP, or Rs1.5 trillion.

Interest expenses reached Rs3.8 trillion, reflecting a significant increase of 35 per cent year-over-year. This rise is attributed to higher financing requirements during the October-December period of FY25.

According to data from the SBP, Pakistan’s total debt and liabilities surged to Rs88 trillion in the first half of FY25, up from Rs81.9 trillion a year prior. The country’s total debt stood at Rs85.2 trillion, an increase from Rs78.6 trillion last year.

In terms of foreign currency, Pakistan’s external debt and liabilities reached $131.06 billion by the end of December 2024, slightly up from $131.03 billion at the end of June.