ISLAMABAD: Pakistan’s total debt and liabilities reached an unsustainable peak of Rs62.5 trillion (or 24% of GDP) at the end of September 2022, according to statistics released by the central bank on Wednesday.
According to the State Bank of Pakistan (SBP), the total liabilities of the country, mainly government debt, surged by Rs12 trillion, or 23.7%, compared to a year ago.
The percentage of Pakistan’s overall debt and liabilities in relation to the size of the GDP was not provided by the central bank. In the past year, the public debt alone increased by Rs9.7 trillion, which is all the government’s fault. By the end of September 2022, the gross public debt was 51.1 trillion rupees, according to the SBP.
During his visits to China, Saudi Arabia and the United Arab Emirates, Pakistan’s Finance Minister Ishaq Dar pleaded for additional loans so as to meet this year’s gross financing requirements. The government is also in dialogue with foreign commercial banks, the World Bank and the International Monetary Fund (IMF) to secure loans.
There is a clear mismatch between the increase in public debt and the budget deficit, showing the adverse impact of the currency devaluation on the external debt stock.
Due to the growing relations between Pakistan, the international financial institutions (IFI), and Washington, Pakistan’s total external debt and liabilities in US dollars have stayed nearly steady at $127 billion over the past year. However, due to the devaluation of the rupee, there was a significant increase in external debt.
By the end of September, Pakistan’s total external debt had increased by Rs6.8 trillion, or 35%, from the previous year to Rs26.5 trillion. The federal government’s external debt climbed to Rs18 trillion in a year, excluding the IMF loans. The weakening of the rupee and the nation’s efforts to increase its foreign currency reserves through borrowing were the main causes of the net increase in external debt of Rs1.3 trillion.
Pakistan’s debt from the IMF increased by 44% within one year to Rs1.7 trillion by the end of September, stated the SBP. This is despite the fact that the IMF has disbursed about $2 billion less than its scheduled releases during this period.
The federal government’s total domestic debt increased to Rs31.4 trillion, an addition of Rs5 trillion, or 19%, in one year.
The lower-than-targeted tax collection, steep currency devaluation, high interest rates, rising expenditures along with losses incurred by state-owned companies and debt mismanagement were the main reasons for the surge in public debt.
According to the central bank, the average exchange rate on the last day of September 2022 was Rs228 to $1 due to a decline of 57.4% in just one year. External debt of the government was significantly impacted by this.
The cost of debt servicing has significantly increased as a direct result of the growing debt load. Debt servicing reached Rs1 trillion in just one quarter of the current fiscal year. According to the government’s updated projections, the cost of debt servicing may exceed Rs4.7 trillion, or about Rs750 billion more than had been budgeted.
