The debt stock of Khyber Pakhtunkhwa (KP) has increased by over 28% in a single year, reaching Rs680 billion by June 30, 2024, according to the provincial finance department.Â
The KP finance department’s bulletin reported that the debt rose from Rs530.72 billion in June 2023 to Rs679.55 billion by June 2024. The department attributed this increase to a 14.31% rise in net loan disbursements (Rs75.97 billion) and a 13.73% impact from currency devaluation.
This sharp rise has prompted warnings from international lenders about potential solvency risks unless immediate corrective measures are taken. Lenders have cautioned the KP government about severe consequences, including financial instability beyond March 2025.Â
The province’s leadership has been criticized for prioritizing political activities over addressing financial mismanagement, despite prolonged challenges from terrorism and law and order issues affecting the population.
The rupee’s depreciation by 13.73% added Rs72.87 billion to the debt stock, even without new loans, as existing foreign debts required more rupees for repayment. Additionally, loan disbursements from ongoing agreements increased the debt by Rs75.97 billion.
KP currently has 107 loans, with 32 still in the grace period allowing funds to be withdrawn. The remaining 75 loans have entered the repayment phase. Between July 2023 and June 2024, KP made debt payments totaling Rs38.73 billion, comprising Rs24.78 billion in principal and Rs13.95 billion in interest.
The provincial government has allocated Rs67 billion for debt payments in 2024-25, including Rs40 billion for principal repayments and Rs27 billion for interest payments. During FY24, only one new loan was signed with the Asian Development Bank (ADB) for an $80 million food security project.
The bulletin also highlighted a concerning surge in interest payments, which rose by 110% to Rs13.95 billion, while principal repayments increased by 18%. Variable interest on 15 loans reached Rs9.6 billion in FY24 compared to Rs4.3 billion in fixed interest on 92 loans, further straining the province’s financial health.
