Govt’s domestic debt reaches Rs13.8trln in July

KARACHI: The government’s domestic borrowing edged up to Rs13.8 trillion at the end of July from Rs13.6 trillion in the previous month, the central bank data showed on Wednesday.

The State Bank of Pakistan (SBP) said the government’s domestic debt rose 10 percent in the month under review from Rs12.5 trillion at the end of July 2015.

The country has been seeing a significant increase in the government domestic debt for the last three years. The government borrowing rose to 46 percent of GDP in July from 42.5 percent in June 2013.

Economists said the government failed to prevent the debt accumulation despite that it took several measures for the fiscal discipline and structural reforms. “The debt-to-GDP ratio increased from 61.7 percent in 2014/15 to 65.2 percent in 2015/16, which is alarming,” said an economist. “There would be pressure in the government foreign exchange reserves when it would pay heavy repayment against the external borrowing, weakening the profile of public debt.”

The widening revenue and expenditure gap, however, compelled the government to seek local and external funds to bridge the budget deficit.

The fiscal deficit stood at 4.6 percent of GDP during the fiscal year of 2015/16.   

The domestic financing is the main source of revenue as external flows are shrinking.

The SBP said total government debt, including external loans, stood at Rs19.2 trillion at the end of July, up 11.30 percent from a year earlier. 

The government’s external debt, including loans from the international financial institutions, the International Monetary Fund and other lenders, amounted to Rs5.4 trillion, showing 14.9 percent increase in the month under review over the corresponding month of the last year. 

The share of long-term debt was up 2.63 percent to Rs7.6 trillion from Rs7.4 trillion a year ago. The permanent debt, emanating from borrowing through long-term papers, including Pakistan Investment Bonds, increased to Rs5 trillion, up 1.69 percent over the last year. 

Commercial banks continued to invest in risk-free government securities (market treasury bills), pushing the short-term debt floating to Rs6.15 trillion.   Stocks of national savings, however, amounted to Rs2.5 trillion in July as against Rs2.4 trillion last year.