Public debt surges 8.82 percent to Rs15.796 trillion in January

KARACHI: Pakistan’s domestic debt rose 8.82 percent to Rs15.796 trillion in January 2018, higher than the debt recorded a year earlier, the central bank data showed on Tuesday.

Major contribution in the domestic debt came from bank and non-bank borrowings. The government continued to rely on domestic sources - central bank and commercial banks - over the past few years to meet its budget deficit financing requirement.

The State Bank of Pakistan (SBP) figures showed that majority of the government’s domestic debt was contributed by a short-term debt. The short-term debt rose to Rs7.944 trillion in January 2018 from Rs6.492 trillion a year ago.

However, the long-term debt fell to Rs7.852 trillion at the end of January, compared with Rs8.022 trillion in the same month of the last fiscal year.

Analysts said the pace of accumulation in domestic debt remained high after the completion of $6.4 billion worth of International Monitory Fund-supported extended fund facility programme in August 2016.

The budget deficit started rising owing to low revenue collection, higher spending on electricity subsidies, and development related expenditure in terms of the China-Pakistan Economic Corridor (CPEC).

As per the analysts, this growing budget deficit could lead to further expansion in domestic debt in months to come.

Analysts predict the FY18 budget deficit to be higher than the government target of 4.1 percent of gross domestic product (GDP). They expect the fiscal deficit to increase to 6.5 percent of GDP in FY18 as revenue is likely to remain lower in the second half of FY18. But, development spending could accelerate under the CPEC commitments.

The central bank estimated the budget deficit could be 5-6 percent of GDP during FY18.

Pakistan managed to curb its fiscal deficit at 2.2 percent of GDP in the second half of the current fiscal year, aided by lower development expenditure.

The IMF, in its statement on the first post-programme monitoring discussion with Pakistan said, “Following significant fiscal slippages last year, the fiscal deficit is expected at 5.5 percent of GDP this year, with risks towards a higher deficit ahead of upcoming general elections.”