Govt borrows 77% domestically to finance fiscal deficit

May 23, 2024 (MLN): The government borrowed around 77% of financing of federal fiscal deficit through domestic sources during the first half of fiscal year 2023-2024, Finance Ministry’s mid-year review report showed on Tuesday.

During H1 FY24, total financing stood at Rs2.7 trillion, of which 77% or Rs2.09 trillion was sourced domestically, while the remaining Rs608 billion came from external sources.

The composition of domestic debt as of end-December 2023 showed Pakistan Investment Bonds (PIBs) accounted for 60%, Market Treasury Bills (MTBs) 20%, Government Ijara Sukuk (GIS) 10%, and National Savings Schemes/Others 10%.

Meanwhile, external debt composition as of end-December 2023 showed multilateral accounted for 53%, bilateral 31%, Eurobonds 9%, and Commercial/Others 7%.

According to mid-year review report, the government retired short-term T-Bills by around Rs1tr, gross issuance of fixed-rate PIBs was Rs840bn against maturity of Rs1.2tr, while the gross issuance of floating-rate PIBs was Rs5tr against repayment of Rs2tr.

Gross issuance of Government Ijara Sukuk was Rs1.3tr against no maturity, and Rs30bn was raised successfully from first ever Ijara Sukuk (one-year fixed rate Ijara Sukuk) auction on Pakistan Stock Exchange (PSX).

Read: PSX secures Rs478.78bn in bids for inaugural 1-year GIS Auction

Participation stood at Rs478bn, with 90% contribution from non-banking sector.

The report noted that National Savings Schemes (NSS) flows remained subdued.

External budgetary disbursements were $5.4bn, with $2.2bn from multilaterals, $2.7bn from bilaterals, and $0.5bn from Naya Pakistan Certificates.

External budgetary repayments were $3.3bn, according to the report.

Moreover, $1bn China SAFE deposit and $3bn KSA deposits were rolled over for one year in July and December 2023 respectively.

Meanwhile, $1.2bn was received under the International Monetary Fund (IMF) Stand-by Arrangement and $1bn as UAE deposit for balance of payments support.

The report showed that total federal expenditure rose 58% YoY to Rs6.71tr during H1 FY24. A major chunk of expenditure was for meeting interest payments worth Rs4.2tr.

Of the total interest expense, 88% or Rs3.72tr was interest on domestic debt and the remaining Rs502bn was on external interest payments.

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