ISLAMABAD: The Pakistan economy, under a constant “Godzilla-like” debt burden, has been rapidly borrowing, leading to nearly fivefold increase in debt since 2013. The total debt has ballooned by 372 percent to Rs67.525 trillion as of March 2024, as the country’s revenues continue to fall short of its expenditures.
The Economic Survey reveals government paid a total interest of Rs5.5118 trillion on public debt in the first nine months of FY24. If today Pakistan decides to retire all its public debts, it has to forego around two-thirds of its GDP, which is 63.67pc of its Gross Domestic Product (GDP). Pakistan’s GDP valued at current market prices is Rs106.045 trillion ($375 billion) at present. This indicates Pakistan violated Fiscal Responsibility and Debt Limitation Act (FRDLA) which calls for limiting debt to GDP ratio below 60 percent. Pakistan’s public debt has been on a steep rise annually, primarily driven by substantial fiscal deficits. Since 2008, when the country’s total debt stood at Rs6.127 trillion, it has grown more than eleven-fold.
The magnitude of country’s daunting debt burden becomes apparent, as it is estimated every Pakistani, including infants, men and women, carries a debt of Rs279,606. This striking figure was unveiled during the launch of Pakistan Economic Survey 2023/24 on Tuesday.
The survey, based on latest data, indicates Pakistan’s total population stands at 241.5 million.
Breaking down the country’s total public debt of Rs67.525 trillion, it is revealed domestic debt amounts to Rs43.432 trillion, while external debt stands at Rs24.1 trillion ($86.7 billion).
From June 2018 to March 2024, Pakistan’s public debt saw a dramatic rise, with domestic debt increasing from Rs16.416 trillion to Rs43.432 trillion, and external debt escalating from Rs8.537 trillion to Rs24.093 trillion. The total public debt surged from Rs24.953 trillion in June 2018 to Rs67.525 trillion by March 2024.
During these nine months, around 88pc of fiscal deficit was financed through domestic markets, with remaining 12pc coming from external sources. The government focused on long-term domestic debt securities, primarily floating rate Pakistan Investment Bonds (PIBs) and Sukuk, to manage its fiscal deficit and repay debt maturities. This strategy allowed government to retire Rs0.8 trillion in Treasury Bills, reducing short-term maturities.
To enhance competitiveness and transparency in borrowing operations and diversify the investor base, the government amended Treasury Bills Rules of 1998 and Ijara Sukuk Rules of 2008. These amendments facilitated maiden auction of 1-year fixed rate Ijara Sukuk on Pakistan Stock Exchange (PSX) in December 2023, with entire Sukuk auction system now shifted to PSX. Additionally, the government introduced a 1-year discounted Sukuk instrument, issuing approximately Rs1.5 trillion in Shariah-compliant Sukuk instruments to diversify investment options.
External budgetary disbursements totaled $6.3 billion, with $2.7 billion from multilateral sources, $2.8 billion from bilateral development partners and $0.8 billion from Naya Pakistan Certificates. The government also received $1.2 billion under IMF’s Stand-By Arrangement (SBA) and a $1.0 billion bilateral deposit from the UAE for balance of payment support.
Regarding debt servicing, the interest expense on public debt during the first nine months of current fiscal year was recorded at Rs5.517 trillion against an annual budget estimate of Rs7.302 trillion. Interest expenses on domestic debt alone were Rs4.807 trillion, which is 55pc higher compared to the same period in previous year. This increase is attributed to high cost of borrowing on new domestic debt and resetting of existing floating-rate debt at higher rates due to an elevated policy rate.
