Domestic debt keeps climbing to touch Rs15.4t by end of July 2017

ISLAMABAD: The curse of mounting debt doesn’t seem to be fading away for Pakistan as federal government’s domestic debt increased to Rs15.4t by end of July 2017.

As reported by Express Tribune, half of this amount were short-term loans revealed data released by State Bank of Pakistan (SBP) on Friday. In last one year, the net domestic debt has seen a Rs1.534t increase, registering a rise of 11pc from same period last year (SPLY).

In span of a month, the domestic debt increased by Rs540b to touch Rs15.4t during July compared to Rs14.9b in June. Concerns over sky-high debt has seen a rise in civil-military tensions, with the army chief also expressing worries over the economic situation last week.

Shocking was the increase in short-term public debt which rose to 49.4pc or Rs7.8t by end of July. In SPLY, short-term pubic debt had stood at Rs6.2t or 44.4pc. An increase of 23.4pc or Rs1.44t was witnessed in a span of one year, indicating that increase in overall debt was contributed by a rise in short-term loans.  Short-term borrowing majorly increased via sale of Market Treasury Bills (MTBs).

MTBs borrowing of the federal govt grew by Rs4.4t, registering a 41pc increase or Rs1.3t in a span of one year. And MTBs sold to refill cash increased by Rs3.2t, resulting in net addition of Rs364b in a span of one year.

This trend of rise in short-term debt is being attributed for banks refusing to provide long-term loans due to an anticipated rise in interest rates, according to experts. The debt structure has entirely changed due to federal government’s dependency on SBP for financing its deficit.

Ministry of Finance denies the debt burden of Pakistan has hit menacing levels, considering it revised the meaning of public debt twice to hide the actual debt figure.

Changes in the makeup of domestic debt highlight the government ineptness in implementing its second Medium Term Debt Management Strategy 2016-19, whose goal is to reduce the country’s refinancing risk and lengthen maturity profile.

Pakistan’s long-term debt maturity period of more than one to ten years, went up a touch to reach Rs7.8t. Its share in total domestic debt shrinked to 50.6 by end of July compared to 55.8pc in SPLY.