Pakistan’s public debt reaches a staggering Rs36.6 trillion

Pakistan’s public debt increased by Rs1.505 trillion or 4.28 percent in the eight months of this fiscal year amid an increase in government borrowing to plug the budget deficit gap. A huge proportion of this borrowing was from domestic sources.

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The government debt has reached a staggering Rs36.6 trillion in the eight-month fiscal year 2021, from July 2020 to February 2021.

According to the data released by the State Bank of Pakistan (SBP) on. Monday, the central government (public) debt increased by 4.2 percent during the first eight months (July-Feb) of this fiscal year (FY21).

According to the SBP statistics, the debt stocks rose to an all-time high level of Rs36.6 trillion at the end of Feb 2021 compared to Rs35.1 trillion till the end of June 2020, depicting an increase of Rs1.51 trillion. This shows a 9.6 percent increase in debt in February YoY.

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A large portion of this Rs36.6 trillion debt, that is, Rs24.8 trillion is the domestic debt. This means that the government is still borrowing a lot from banks and other domestic financial institutions in the local market.

According to SBP, the government’s domestic debt mounted up by 6.43 percent during the July-Feb of FY21. With this rise in debt, the government’s domestic debt stood at Rs 24.8 trillion in Feb 2021 up from Rs23.3 trillion in June 2020.

However, the country’s external debt slightly increased by Rs8 billion during the first eight months of this fiscal year to reach the Rs11.832 trillion mark in Feb 2021. The federal government’s domestic long-term debt rose by Rs1.75 trillion or 10 percent to reach Rs19.454 trillion at the end of Feb 2021 compared to Rs17.704 trillion in June 2020.

It must be kept in mind that the data is representing the latest month of February, and Pakistan got money from IMF, World Bank, ADB, and the Eurobonds later. This means by April’s end, the External Debt would also be pushed up.

The domestic short-term debt of the federal government declined by Rs252 billion or 4.5 percent to Rs5.326 trillion in Feb 2021 as against Rs5.578 trillion in June 2020. The government has set a budget deficit target for FY21 at Rs3.43 trillion or 7.5 percent of GDP.

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The largest contributor to short-term debt was the Market Treasury Bills. These bills are used by the government against investors as promissory notes or IOUs to get small funding from projects like highways etc.

According to the auction calendar issued by the SBP on Monday, Banks also fulfill a large part of the government domestic financing requirements. In the April-June 2021 period, the government aims to raise Rs4.7 trillion through borrowing from Market Treasury Bills, and Rs825 billion from Pakistan Investment Bonds.

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