Pakistan Federal Government Debt Rises by 14.2%

As per data released by the State Bank of Pakistan, federal government’s debt as of May 2018 has increased to 23.76 trillion in the eleven months of the fiscal year 2017-18, an alarming jump of 2.96 trillion from its debt levels in the corresponding period of last year.

This double-digit growth of 14.2% is a result of the massive rupee depreciation of about 13% during the fiscal year 2018 as well as the mounting budget deficit that has the led the government to resort to external help for financing. As a result, the federal government’s external debt has jumped to 7.32 trillion, increasing by 27% over last year.

Total domestic debt taken over by the government has similarly increased by about 9.3% so far, reaching Rs 16.4 trillion by May compared to 15.04 trillion last year.

Federal government’s total borrowing through MTBs increased to 4.08 trillion in May, increasing by 2.5% compared to last year. However, on a month on month basis, borrowings through MTBs decreased by 1.05 trillion. Similarly, MTBs issued to replenish cash rose by close to Rs 2 trillion since May last year, an increase of about 69%.

Debt raised through Pakistan Investments Bonds (PIBs) has however decreased by about 21.3% over May last year as total debt raised through them were reported at Rs 3.39 trillion compared to Rs 4.31 trillion during the matching period last year.

The share of short-term public debt in federal government’s total domestic debt structure has increased from 44.1% in the last month of the fiscal year 2017 to 54.4% in the 11 months of the fiscal year 2018. This change in the debt structure is reflective of the fact that banks have been unwilling to engage in long-term public debt securities in anticipation of further rate hikes, leading the government to increase its reliance on borrowings through short-term market treasury bills.