Pakistan’s National Debt Grows to Rs. 38 Trillion

Pakistan's total national debt, recording a growth of Rs. 1,607,000 billion for the first 9 months of the fiscal year in Rs. 38,006 trillion at the end of March 2021, as compared with Rs. 36,399,000 at the end of June2020 (2020-21).

In comparison to the Rs. 2,499 trillion growth in the same time of previous year, the study showed that the growth of Rs. 1,607 trillion during the first nine months of this tax year was considerably smaller.

"Despite the exceedingly severe macroeconomic circumstances worldwide, Pakistan has managed to stop its public debt portfolio from growing. As a result, Pakistan has actually had one of the lower public debt growth," the study noted.

In the first nine months of the fiscal year, the overall growth in public debt has been less than Rs. 2 065 trillion borrowed by the Federal Government to finance its budget deficit.

The difference is mostly due to Pak Rupee's rise against the US$ by about 9%, which resulted in a decline in the value of the public foreign debt in Pak Rupees, it said.

During the epidemic, Pakistan saw minimal state debt growth. As a result, Pakistan's debt-to-GDP relationship grew by a minimum of 1.7 percent, from 84 percent in 2019 to 98 percent in 2020, and by 87.6 percent at the end of June 2020 against 85.9 percent at the end of June 2019.

It adds that Pakistan's debt-to-GDP ratio is likely to be reduced by under 84% by the conclusion of the financial year.

The poll highlighted an increase of roughly 3.6 billion dollars in public external debt by the end of March 2021 in the first 9 months of the current fiscal year to 81.6 billion dollars. The rise reflects a $2.2 billion rise in multilateral and bilateral debt. This includes additionally $0.5 billion from the IMF under the Extended Fund Facility (EFF).

Cumulative rise of $0.4 billion was recorded on the stock of Pakistan Banao Certificate and Naya Pakistan Certificates.

During the first nine months of 2020-21, the gross external lending disbursements were $7.724 billion, including $3.397 billion from multilateral funds, and accounted for 44% of the total disbursements.

In overall payments, bilateral sources provided $1.207 billion or 16%. As a result, SAFE deposits in China amounted to $1,000 million and the overall distribution of commercial loans was $3.12 billion or 40%.

In the first nine months of the current fiscal year, external loan repayments were recorded at $5.147 billion compared with $5.537 billion for the same time the previous year. This decrease is mostly attributable to the DSSI program and no repayment of Eurobonds/Sukuks during the present financial year.

In the first nine months of the fiscal year, interest payments were recorded at $1.08bn compared to $1.58bn in the same period in the previous year.

During the first nine months of the current fiscal year, interest maintenance was reported at Rs 2.104 billion, compared to its annual forecast of Rs. 2.946 billion. In the first nine months of the current fiscal year, domestic interest paid was 1.934 billion Rs or about 92 percent of overall interest service, mostly attributed to increasing domestic debt in the entire public debt portfolio.

In full years (2020-21), the interest service is likely to stay below the estimated DSSI expenditures, mainly owing to an extension of Pak Rupee to the US dollar from January to June 2021 and lower interest service owing to withdrawals on terminated prize bonds, based on national savings schemes.

In addition to the country's net inflows, during the first nine months of the fiscal year, the movement of public debt externals affected the following factors. First, in terms of US dollars, the re-assessment loss resulting from the US dollar's inflation of other international currencies increased consumer external debt by around $1.1 billion.

This growth was largely attributed to a devaluation of 8% of the U.S. dollar, 5% of euros, and 3% of the Special Drawing Right (SDR). As a consequence of the depreciation of the US dollar against other foreign currencies, the above-mentioned translation loss was more than offset by Pak Rupee appreciation against the US dollar by 9%, which reduced the Rupee value of foreign public debt.

In the first nine months of the current fiscal year, domestic debt amounted to Rs 25 552 trillion at the end of March 2020, a growth of Rs. 2 27 trillion.

The study indicated that permanent debt was at Rs. 15,882 trillion at the end of March 2021, indicating Rs. 1,852 trillion rise over the first nine months of the current financial year, and 62 per cent was on the domestic indebtedness portfolio.

The fork of this rise shows that net government mobility by issuing PIBs and GIS was Rs 1.488 billion and Rs. 439 billion and net retirement of Rs. 74 billion using pricing bonds was seen owing to the discontinuance of prize bonds of different denominations.

At the end of March 2021, floating debt amounted to 6,000 billion rs or around 24% of the overall domestic debt portfolio. The net mobilization through the issuance of T-bills was Rs. 421 billion in the first nine months of the current fiscal year.

At the end of March 2021, the inventory of non-funded debt was Rs 3.652 billion, or around 14% of the whole domestic debt portfolio. During the first nine months of the current fiscal year, unfinanced debt registered a net decrease of Rs. 22 billion.

The study found that past economic policies had been misaligned, including large fiscal deficits, loose monetary policy, and defense of the exchange rate overvalued, fuelled consumption and short-term, but steadily eradicated macroeconomic tampons, increased foreign debt, inflated current-account deficits, and depleted international reserves.

The international foreign exchange-reserved public debt ratio improved and increased by 4.1 in 2019-20 compared to 5.1 in the prior fiscal year as the country's foreign-exchange reserves rose again due to slowdowns in fresh debt growth.

Growth in foreign government service, principally driven by Eurobonds repayments and commercial loans outweighing foreign exchange debt service in the FEE, grew to 20.4% in 2019-20 compared to 17.2% in 2018-19. External public debt service was the result of the rise.

A better balance of payments will further improve the sustainability of external debt.

In April 2021, after three years of gaps, Pakistan successfully raised $2.5 billion through a multi-transaction of 5, 10, and 30-year euro bonds joined the international capital market.

Pakistan's debt burden-reduction plan comprises a commitment to primary surpluses, low and stable inflation, promoting policies that encourage stronger long-term economic growth, and following the economic fundamentals exchange rate system. As a result, the public debt with a reduced fiscal debt deficit is predicted to go down steadily and public debt sustainability is increased by efforts by the government to improve maturity structure.