Public debt jumps to Rs40trln in July

KARACHI: The country’s public debt reached around Rs40 trillion in the first month of this fiscal year, mainly as a result of the increased financial requirements to plug holes in the budget.

Public debt rose by Rs1.17 trillion or 3 percent to Rs39.869 trillion by the end of July, the central bank’s data showed on Monday. The debt figure stood at Rs38.697 trillion in June. The debt surged 12 percent year on year. It was Rs35.557 trillion at the end of July 2020.

Major increase in debt was spurred by domestic debt, which went up 2.13 percent to Rs26.826 trillion, while foreign debt also jumped 4.91 percent to Rs13.043 trillion. The budget deficit as a percentage of the gross domestic product was 7.1 percent in the last fiscal year of FY2021, compared with 8.1 percent in the previous year. The government had a primary budget deficit of Rs654 billion, compared with the International Monetary Fund’s June-end performance criteria of a surplus of Rs246 billion. Last year, the primary balance recorded a deficit of Rs757 billion.

A large part of the deficit was financed through net domestic financing. Analysts expect the budget deficit to be around 7.0-7.5 percent of GDP in FY2022. The significant accumulation in the public debt during the past years has pushed up the markup expense at high levels. The interest payments to the Federal Board of Revenue tax ratio have also seen a large increase in the past few years, according to the SBP’s third quarter report.

The SBP’s data showed that the bulk of the addition in the domestic debt originated from long-term instruments. The long-term debt rose to Rs19.052 trillion from Rs19.556 trillion. However, permanent debt slightly fell to Rs15.399 trillion from Rs15.904 trillion.

The government diversified the investor base and mobilised funds across long-term instruments, it introduced in FY2021, including Shariah-compliant Sukuk of longer tenors with fixed and variable returns, and launch of new long-term floating rate Pakistan Investment Bonds.

The short-term debt increased to Rs7.743 trillion from Rs6.680 trillion. Naya Pakistan Certificates held by residents only were included in the category of domestic debt.