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Monday, April 15, 2024

Federal Debt Rises Modestly in November 2023

The surge in Pakistan's total federal debt is primarily attributed to a robust increase in long-term domestic debt.

In November 2023, Pakistan experienced a marginal increase of 1.5% in its total debt stocks, combining both domestic and external liabilities. The State Bank of Pakistan (SBP) reported that the central government’s debt reached Rs63.389 trillion, a slight uptick from Rs62.482 trillion in October 2023.

A detailed breakdown reveals a notable surge of 6.1% (Rs1.9 trillion) in long-term domestic debt, reaching Rs33.206 trillion in November, compared to Rs31.292 trillion in October. Conversely, short-term domestic debt witnessed a significant decline of over 15%, decreasing to Rs7.62 trillion from Rs8.98 trillion in October.

Long-term Domestic Debt Leads the Increase

The surge in Pakistan’s total federal debt is primarily attributed to a robust increase in long-term domestic debt. This increment reflects borrowing dynamics, with long-term debt standing at Rs33.206 trillion in November 2023, witnessing a 24.16% YoY increase and a 1.35% MoM increase. Short-term debt, on the other hand, increased by 11.3% YoY but experienced a 15.18% MoM decrease.

Examining the sources, the data indicates that a substantial portion of the debt, Rs40.96 trillion, was domestic, comprising Rs33.21 trillion long-term debt and Rs7.62 trillion short-term debt. The remaining Rs22.43 trillion was external. This represents a YoY increase in domestic debt by 24.16%, with long-term debt growing by 27.55% YoY to Rs33.21 trillion.

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Instrument-wise Debt Distribution

Within long-term domestic debt, Pakistan Investment Bonds (PIBs) dominated, accounting for Rs24.98 trillion and reflecting a growth of 28.33% YoY and 8.28% MoM. In short-term domestic debt, Market Treasury Bills (MTBs) amounted to Rs7.54 trillion, increasing by 11.05% YoY but decreasing by 15.33% MoM.

The rise in debt is attributed to borrowing from both domestic and foreign sources, primarily to cover the fiscal deficit. The external debt increased by 1.6% (Rs361 billion) to reach Rs22.434 trillion in November 2023, compared to Rs22.073 trillion in October. The total debt escalated by 24.39% YoY, reaching Rs63.39 trillion in November 2023.

Going forward, the data suggests that despite fluctuations in short-term debt, the government’s strategic borrowing, especially through instruments like PIBs, has played a pivotal role in managing its fiscal obligations. This nuanced debt composition provides insights into the economic strategy and fiscal management policies adopted by the Pakistani government.