In the initial seven months of the current fiscal year, Pakistan’s public debt witnessed a 6.6% increase, reaching Rs 64.842 trillion, according to recent data from the State Bank of Pakistan (SBP).
This rise underscores the fiscal challenges that the newly sworn-in government must navigate.
From July to January, the nation’s debt surged by Rs 4 trillion, driven by borrowing from the preceding caretaker government to cover an expanding budget deficit ahead of the February general elections.
This borrowing spree has left the newly elected government with the daunting task of managing the ballooning debt amidst a persistent budget shortfall.
The central government’s debt saw a 17.8% year-on-year increase in January. However, there was a slight decrease of about 1% in debt levels from December 2023 to January 2024.
Prime Minister Shehbaz Sharif has initiated expedited negotiations with the International Monetary Fund (IMF), aiming to secure the final $1.1 billion tranche of a standing $3 billion loan agreement set to expire in April.
This move comes at a critical time as Pakistan grapples with significant external financial obligations, including $25 billion in due external debt payments in the upcoming fiscal year starting July.
The SBP reports a 9.8% increase in the domestic debt of the federal government, totaling Rs42.626 trillion between July and January of the fiscal year 2024.
Conversely, external debt rose by 7.4% to Rs22.216 trillion by the end of January 2024.
The Ministry of Finance highlighted Pakistan’s unsustainable public debt situation as a major economic challenge.
The country has consistently breached the Fiscal Responsibility & Debt Limitation Act since 2013, with high-interest rates, declining profits from state-owned enterprises (SOEs), and weak tax collection further complicating debt repayment efforts.
