Public debt rises to Rs21.7 trillion in August

KARACHI: Pakistan’s public debt increased to Rs21.770 trillion in August, 11.23 percent higher than that recorded a year earlier, the central bank’s data showed on Saturday.

The debt came in at Rs19.572 trillion as of August 31, 2016.

A bulk of the rise in public debt stemmed from domestic borrowing, while external debt saw a slight increase
during the period under review.

The State Bank of Pakistan (SBP) data showed that the government continued to rely on bank borrowing to meet its funding requirements. Domestic debt surged to Rs15.707 trillion at the end of August from Rs14.147 trillion in the same period of last fiscal year, the bank stated.

Analysts attributed high public debt levels to increased spending, growing budget deficit, weaker tax and non-tax receipts, and stagnant foreign inflows.   

The composition of domestic debt witnessed increment in long-term and short-term debts. The size of floating debt also went up during the period under review.

The short-term debt, including shorter tenor instruments, mainly market treasury bills, rose to Rs7.914 trillion in August from Rs6.465 trillion a year earlier.

Similarly, long-term debt registered an accumulation amounting to Rs7.792 trillion against Rs7.681 trillion in August 2016.

Government borrowed Rs3.850 trillion from commercial banks through treasury bills as of August 31, 2017, compared with Rs3.323 trillion in the corresponding period of last year. Borrowing through PIBs fell to Rs4.316 trillion against Rs3.932 trillion a year before.

Government plans to borrow Rs4.375 trillion from the banks through sale of treasury and long-term papers in November-2017 to
January-2018 to fund its budget deficit. It expects to raise money for covering the bulk of the budget deficit from the local market [banking sources] in the current fiscal year.

Financing the budget gap is likely to be carried out through sizeable financing from external sources too.

The budget deficit continued increasing owing to slower growth in revenue collection as well as sharp increase in expenditure.

Meanwhile, prospects of the US-backed collation support fund also remains uncertain.

Analysts predict government appetite for bank borrowing to remain high in FY18. However, banks, along with the placement of funds into the government securities, look to diversify their lending portfolios.