Pakistan’s total federal debt exceeded Rs 70 trillion by the end of August 2024, due to high borrowing to finance the fiscal deficit, according to the State Bank of Pakistan (SBP).Â
The central government’s overall debt, including domestic and external liabilities, surged by 2.1% during the first two months of FY25, reaching Rs 70.362 trillion, compared to Rs 68.914 trillion at the end of June 2024. This increase of Rs 1.448 trillion was largely driven by a sharp rise in domestic debt.
Domestic borrowings alone increased by Rs 1.179 trillion during July and August, pushing the domestic debt stock to Rs 48.34 trillion in August, up from Rs 47.160 trillion in June.Â
The rise in domestic borrowing is primarily attributed to efforts to finance the widening fiscal deficit, driven by rising expenditures and slower-than-expected revenue collection.
In contrast, external debt in rupee terms saw a relatively modest increase of 1.2%, or Rs 269 billion, during the same period. The total external debt rose to Rs 22.023 trillion by the end of August, up from Rs 21.754 trillion in June 2024. The increase in external debt was partially tempered by a slight appreciation of the Pakistani rupee against the US dollar.Â
SBP data shows that the weighted average customer exchange rate for the dollar stood at Rs 278.3668 in June 2024 and marginally increased to Rs 278.5769 in July 2024, with the rupee continuing to stabilize after significant volatility earlier in the year.
Year-on-year, the central government’s debt-to-GDP ratio improved, dropping to 65% in August 2024 from 73% in August 2023. This decrease was primarily driven by a reduction in the external debt-to-GDP ratio, which fell from 27.6% to 20.2% over the same period. The decline in external debt relative to GDP is largely attributed to the appreciation of the rupee, which strengthened from PKR 305.61 per US dollar in August 2023 to PKR 278.57 in August 2024.
