Public debt rises to Rs72.1tr

KARACHI: Government debt rose by Rs3.209 trillion, or 4.65 per cent, to Rs72.1 trillion in the seven months of the current fiscal year due to increases in both domestic and external borrowings, central bank data showed on Thursday.

As of June 30, 2024, the federal government’s debt was Rs68.91 trillion. By the end of January, the total debt stock had increased by 0.66 per cent month-on-month (MoM) and 11.23 per cent year-on-year (YoY).

“Government debt rose in January due to increases in both domestic and external borrowing,” said Awais Ashraf, director of research at AKD Securities Limited.

“Notably, in the domestic debt segment, the government reduced its exposure to Treasury bills (T-bills) by Rs342 billion while increasing its holdings in Pakistan Investment Bonds (PIBs) by Rs558 billion and Ijara Sukuk by Rs129 billion,” Ashraf added.

From July to January, the government retired Rs1.8 trillion in T-bills while shifting its focus towards long-term debt, which grew by Rs4.9 trillion over the same period, he noted.

“Meanwhile, external debt increased by $299 million in January, marking the first rise since September 2024. So far in the current fiscal year, the government has acquired $280 million in external debt.”

Domestic debt increased to Rs50.243 trillion between July and January of FY25. The debt stood at Rs47.16 trillion at the end of June. During the July-January FY25 period, the central government’s external debt rose slightly to Rs21.88 trillion from Rs21.754 trillion at the end of June.

The primary reason for the increase in government debt is straightforward: expenses continue to exceed revenue collection. The Federal Board of Revenue (FBR) consistently fell short of its revenue targets, collecting Rs872 billion in taxes in January, compared to a target of Rs957 billion. However, this collection was 26 per cent higher than the Rs677 billion collected in the same month last year. In February, the FBR collected Rs850 billion against a target of Rs983 billion.

These debt figures came as the International Monetary Fund (IMF) team is reviewing Pakistan’s performance against the economic targets set under the $7 billion bailout. If the review is cleared and approved by the IMF’s board, it could unlock a $1 billion tranche of funding for cash-strapped Pakistan ahead of its annual budget, which is typically presented in June.

According to analysts, the only major target that Pakistan has not met under the ongoing IMF review programme is the tax collection target. According to reports, the IMF is considering lowering this target due to the economic slowdown.

In a related development, the government raised Rs91.6 billion through a Sukuk auction at the Pakistan Stock Exchange (PSX) on Thursday, surpassing the pre-auction target of Rs90 billion. The cut-off rates for one-year discounted Ijarah Sukuk increased by 75 basis points (bps) to 10.9999 per cent, while the rate for three-year fixed rental rate Sukuk fell by 1bp to 11.49 per cent, and the rate for five-year paper also decreased by 1bp to 11.98 per cent.