Govt retires Rs1.9 trillion debt amid revenue growth, falling inflation

The government announced the retirement of Rs1.9 trillion in debt, supported by record-high revenues from the petroleum development levy (PDL) and substantial profits from the State Bank of Pakistan (SBP), driven by elevated interest rates and a decline in inflation.

According to the Ministry of Finance’s (MoF) Monthly Economic Update & Outlook (November 2024), the economy is showing signs of sustained recovery, bolstered by receding inflation, rising remittances, IT exports, and a stable external and fiscal outlook. 

The government retired Rs1.87 trillion in debt compared to Rs753 billion in the same period last year while private sector borrowing reached Rs447 billion, a stark contrast to the Rs153 billion repayment recorded last year. 

This was made possible by a 186% growth in federal revenues, largely attributed to the SBP’s surplus profit of Rs2.5 trillion and the petroleum levy.

Net federal revenues increased to Rs4.02 trillion, up from Rs1.41 trillion last year, with tax revenues rising by 25.5% and non-tax revenues soaring by 567%. 

Meanwhile, total expenditures grew marginally by 1.8% to Rs2.48 trillion, supported by a 5.3% decline in mark-up expenses due to lower policy rates. This fiscal discipline led to a fiscal surplus of Rs1.9 trillion (1.5% of GDP) compared to a deficit of Rs981 billion last year, with the primary surplus reaching Rs3.2 trillion (2.6% of GDP).

The current account and fiscal balance both recorded surpluses during the first four months of FY25, reversing persistent deficits. The ministry noted that exports are projected to range between $2.5-3 billion, imports $4.5-4.9 billion, and remittances $2.8-3.3 billion in November, sustaining the positive external sector trajectory.

The MoF highlighted progress in agriculture, noting an increase of 70.9% in imports of agricultural machinery during July-October FY25. Wheat sowing is on track to meet targets, supported by the timely availability of inputs at reasonable prices. In October, DAP offtake rose 92% year-on-year to 309,000 tonnes, although urea offtake declined by 22% to 358,000 tonnes.

While large-scale manufacturing (LSM) continues to face challenges, month-on-month growth shows resilience in key sectors like textiles and automobiles. The ministry expressed cautious optimism for a progressive recovery, citing fiscal consolidation and external stability as critical drivers.