In January, Pakistan’s total debt, which includes both domestic and external debt, surged to Rs 55 trillion due to significant borrowing and a depreciation of the Pak rupee. The State Bank of Pakistan (SBP) revealed that the federal government’s total debt has increased by 15% during the first seven months of the current fiscal year (FY23), reaching a new peak of Rs 54.942 trillion as of January 2023, compared to Rs 47.784 trillion in June 2022, representing a whopping increase of Rs 7.157 trillion.
Experts warn that the government’s reliance on domestic resources to meet its financing needs has increased in the absence of external funding. Moreover, the depreciation of the Pak rupee against the US dollar has contributed significantly to the recent surge in external debt.
A detailed analysis shows that the federal government’s total debt stocks rose sharply by 7.7% in January 2023 alone due to the Pak rupee’s depreciation against the US dollar. In January 2023, the average US dollar exchange rate was Rs 267.94, compared to Rs 226.47 in December 2022.
Overall, the total debt, comprising both domestic and external debt, increased by Rs 3.94 trillion to Rs 54.942 trillion in January 2023 from Rs 50.996 trillion in December 2022. Most of the increase occurred in external debt due to Pak rupee depreciation. External debt rose by 23% or Rs 4 trillion to Rs 20.687 trillion in January 2023 from Rs 16.747 trillion in June 2022. External debt includes long-term loans worth Rs 20.595 trillion and short-term loans worth Rs 92 billion.
Furthermore, the federal government’s domestic debt also surged by 10% to a historic high of Rs 34.255 trillion in January 2023 from Rs 31.037 trillion in June 2022. Domestic debt comprises Rs 27.514 trillion in long-term loans and Rs 6.691 trillion in short-term debt.
The SBP revealed that the total domestic debt stocks comprise permanent debt, unfunded debt, and floating debt. Additionally, foreign exchange bearer certificates, foreign currency bearer certificates, dollar bearer certificates, and special US dollar bonds previously held by residents were part of external debt liabilities. Still, they became part of domestic debt from June 2008 onwards.
With the federal government attempting to secure a $1 billion tranche of the IMF’s Extended Fund Facility (EFF) to avoid default, the central government’s external debt is expected to increase further in the coming months.
