Pakistan covered 88% of fiscal deficit domestically in 9MFY24

June 12, 2024 (MLN): The Pakistani government managed to cover 88% of its fiscal deficit during the first nine months of the outgoing fiscal year (July-March FY2024) through domestic markets and the remaining 12% from external sources, as highlighted in the Pakistan Economic Report FY24 published on Tuesday.

The total debt of the government as of May 2024, stood at Rs61.574 trillion, reflecting an increase of Rs3.8tr compared to FY23.

The growth in public debt during the first nine months of FY 2024 was reduced by 54% as compared to the growth in same period of the preceding year mainly due to the exchange rate stability.

However, the main factor behind the increase in total public debt during 9MFY24 was a massive rise in interest burden of Rs5.52tr, compared to the increase of Rs3.58tr in 9MFY23 amid higher interest rates.

Within domestic debt, the government relied on long-term domestic debt securities, predominantly on floating rate Pakistan Investment Bonds i.e., PIBs and Sukuk for financing of its fiscal deficit and repayment of debt maturities.

The Government was able to retire Treasury Bills (T-bills) amounting to Rs 0.8 trillion which led to a reduction of short-term maturities.

In order to make debt management operations more competitive and improve transparency in borrowing operations as well as diversify the investor base, the government undertook amendments in the Treasury Bills Rules, 1998 and Ijara Sukuk Rules, 2008.

According to these amendments, the government carried out a maiden auction of 1-year fixed rate Ijara Sukuk on PSX in December 2023. The whole Sukuk auction system has now been shifted to PSX.

In addition to existing 3-year and 5-year Ijara Sukuk instruments, the government introduced a 1-year discounted Sukuk instrument with a target to diversify shariah compliant instrument base and give more options to investors with appetite towards Islamic investments.

The survey said that the government successfully issued Shariah-Compliant Sukuk instruments amounting to around Rs1.5 trillion.

Moreover, external budgetary disbursements were recorded at $6.3 billion, of which $2.7bn was received from multilateral sources, $2.8bn from bilateral development partners and $0.8bn was recorded as inflow from Naya Pakistan Certificates

In addition to the above, the government also received $1.2bn under the IMF’s Stand-By Arrangement (SBA) and $1bn bilateral deposit from UAE for the balance of payment support.

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