Pakistan’s public debt surges to Rs38bn in 9MFY21

ISLAMABAD: Pakistan’s total public debt was recorded at Rs38,006 billion at the end March 2021, registering an increase of Rs1,607 billion during the first nine months of the current fiscal year (9MFY21).

According to the Pakistan Economic Survey 2020-21, total public debt which stood at Rs23,024bn in June 2018, was recorded Rs33,724bn in March 2021.

Similarly, an increase of Rs9,136bn has been recorded in the domestic debt in the last three years, from Rs16,416bn in June 2018 to Rs25,552 in March 2021.

Meanwhile, an increase of Rs3, 917bn was registered in the external debt during the last three years as the external debt in June 2018 which was recorded at Rs8,537bn stood at Rs12,454bn in March 2021.

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According to the survey, total public debt to GDP reduced to 70.7 per cent from 80 per cent since June 2020. The government claims that total public debt was less than Rs892bn compared to the same period last year (FY20).

Documents show that the profile of domestic debt has improved significantly during the tenure of the present government. Short-term debt as percentage of total domestic debt decreased to around 23 per cent at end March 2021 compared with 54 per cent at end June 2018;  in-line with the government’s commitment, no new borrowing was made from State Bank of Pakistan (SBP).

Furthermore, the government repaid Rs569 billion during the ongoing fiscal year (FY21) against its debt owed to SBP. The cumulative debt retirement against SBP debt stood over Rs1.1 trillion during the last two fiscal years.

According to this year’s economic survey, Pakistan entered the international capital market after a gap of over three years by successfully raising $2.5 billion through a multi-tranche transaction of 5-, 10- and 30-year Eurobonds under its first-ever Global Medium Term Note Programme.

Debt from multilateral and bilateral sources cumulatively constituted over 80 per cent of external public debt portfolio by the of end March 2021.

Meanwhile, Pakistan is availing the G-20 Debt Service Suspension Initiative (DSSI) for a period of 20-months i.e. May 2020 to December 2021, which will help to defer the debt servicing impact to the tune of around $3.7bn during this period. 

Pakistan’s strategy to reduce its debt burden to a sustainable level includes commitment to run primary surpluses, maintain low and stable inflation, promote measures that support higher long-term economic growth and follow an exchange rate regime based on economic fundamentals. With a narrower fiscal deficit, public debt is projected to enter a firm downward path while the government’s efforts to improve maturity structure will enhance public debt sustainability.

 

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