Pakistan’s total public debt Rs49.2tr in FY22

ISLAMABAD: Pakistan’s total public debt went up by around Rs9.326 trillion in the last fiscal year 2021-22 ending on June 30, 2022; it went up from Rs39.8 trillion in June 2021 to Rs49.2 trillion on June 30, 2022. The exchange rate depreciation caused an increase in total public debt to the tune of a whopping Rs3.764 trillion just in one fiscal year 2021-22, disclosed a report released by the Ministry of Finance.

However, it is relevant to mention here that the county’s total debt and liabilities stood at Rs59.69 trillion on June 30, 2022, as stated by the State Bank of Pakistan. According to the latest Debt Review Bulletin for 2021-22 of the Ministry of Finance, total public debt in dollar terms stood at $240.7 billion in accordance with the exchange rate of Rs204.4 against a dollar.

As per the Fiscal Responsibility and Debt Limitation Act, 2005 (Amended 2022), “total debt of the government” means the debt of the government (including federal and provincial governments) serviced out of the consolidated fund and debts owed to the IMF less accumulated deposits of federal and provincial governments with the banking system. It does not include liabilities so if incorporated, total public debt and liabilities escalated to Rs59.69 trillion.

Dwelling upon the reasons for hiking in total public debt, the report states that the major reasons for the change in total public debt include: (i) fiscal deficit (which can be further bifurcated into two analytically useful components, i.e. primary deficit and interest expense), (ii) increase or decrease in the amount of cash balance maintained with the central bank, and (iii) movements in the exchange rate. The data shows that out of the Rs9.326 trillion surges in total public debt, there has been a primary deficit of Rs2.428 trillion, interest payment of Rs3.182 trillion, cash balance Rs 0.49 trillion and exchange rate impact of Rs3.764 trillion.

The Ministry of Finance has set a benchmark (maximum limit) of 40 per cent for the share of external debt in total public debt. The ministry aims to restrict the share of external debt within this limit. The share of external debt in total public debt increased from 34 per cent in 2020-21 to 37 per cent in 2021-22 but remained below the benchmark (maximum limit) of 40 per cent. The increase was attributable mainly to exchange rate depreciation rather than excessive external borrowings. Going forward, the ministry will advise the government to lower the share of external debt by taking measures to contain the current account deficit and relying more on domestic borrowings to meet the fiscal deficit.

During 2021-22, the government issued fresh/rollover guarantees aggregating to Rs438 billion or 0.7 per cent of GDP. Total external public debt was recorded at $88.8 billion at end-June 2022. Pakistan’s external public debt is obtained from three major sources, with around 48 per cent from multilateral loans, 30 per cent from bilateral loans and 22 per cent from commercial sources (including 13 per cent from bank loans and 9 per cent from Eurobonds/Sukuk) at end-June 2022.

Although borrowing from commercial sources has relatively increased during the last few years, multilateral and bilateral sources still cumulatively constitute 78 per cent of external debt portfolio as of end-June 2022.