April 02, 2022 (MLN): Pakistan’s total public debt continued to snowball as it increased by Rs17.79 trillion during the current government to stand at Rs42.75tr till December 2021 from Rs24.95tr by the end of FY2018.
The country’s total public debt has gone up by Rs5.28tr as of December 2021 from Rs37.46tr by the end of December 2020, driven mainly by federal primary deficit, interest payment and foreign exchange fluctuations. The federal primary deficit of Rs400 billion, interest payment of Rs1.45tr, decrease in cash balances of the government worth Rs477bn while PKR depreciation against USD contributed Rs1.51tr to the rising total public debt burden during July-Dec 2021, the public Debt bulletin released by the Ministry of Finance July-Dec 2021 disclosed.
The Fiscal Responsibility and Debt Limitation (FRDL) Act 2005 defines “total public debt” as debt owed by the government (including federal and provincial governments) serviced out of consolidated funds and debts owed to the International Monetary Fund.
Of the total public debt, Rs26.75tr or 63 percent were domestically borrowed, while the remaining Rs16tr or 37 percent were sourced from foreign creditors.
The total public debt in US dollars stood at $242 billion as of December 2021, using an exchange rate of Rs176.5 against the US dollar.
Within domestic debt, the government relied on long-term domestic debt securities for financing its fiscal deficit and repayment of domestic maturities.
Creditor-wise composition of domestic debt, the report stated the federal government owed Rs13.26tr to the commercial banks which is 50 percent of the domestic debt obtained through government securities. While the government owed 23 percent of the domestic debt to the State Bank of Pakistan (SBP).
Whereas, the government retired/repaid the portion of Treasury Bills amounting to Rs1tr which led to the reduction of short-term maturities in-line with the government’s commitment to reduce its Gross Financing Needs. In addition, the government repaid Rs569bn against SBP Debt. Cumulative debt retirement to SBP stood at Rs1.7tr from July 2019 to December 2021;
External Debt
External debt was recorded at $90.6 billion at the end of December 2021.
Pakistan’s external debt is derived from four key sources, with around 47 percent coming from multilateral loans, 31 percent from bilateral loans, 11 percent from commercial loans and 9 percent from Eurobonds/Sukuk at the end of December 2021.
Although borrowing from commercial sources has relatively increased during the last few years, multilateral and bilateral sources still cumulatively constitute 78 percent of the external public debt portfolio as of the end of December 2021, said the finance ministry.
Of the total foreign obligations, borrowings from multilateral sources amounted to $42.4bn, while loans from the country’s bilateral development partners reached $28.08bn including Paris Club’s loans worth $10.15bn.
The commercial loans that were $9.01bn a year ago surged to $10.22bn or 11 percent of the external public debt.
In addition, Pakistan re-entered the International Capital Markets and successfully raised $1bn in July 2021 through multi-tranche tap issuance of 5-, 10- and 30-year Eurobonds. These bonds were issued at a premium, the report revealed.
Copyright Mettis Link News
31833
