Pakistan’s total debt (domestic and external) rose by Rs. 453.4 billion during the first two months of this fiscal year, mainly due to massive borrowing from domestic resources. According to the State Bank of Pakistan (SBP), the central government’s debt stocks recorded a marginal increase of 1.43 percent reaching Rs. 32.240 trillion at the end of August 2019 compared to Rs. 31.787 trillion in June 2019.
The increase in the central government’s debt originated from the rise in the government’s domestic debt, which increased by 3.5 percent. However, external debt moved down due to continued external debt servicing.
According to the SBP, the federal government’s domestic debt rose to Rs. 21.495 trillion in August 2019 from Rs. 20.732 trillion in June 2019. The domestic debt comprises of Rs. 12.567 trillion of permanent debt, Rs. 3.188 trillion of unfunded debt and Rs. 5.733 trillion of floating debt.
However, the government’s external debt fell by Rs. 310 billion to Rs. 10.745 trillion in August 2019 down from Rs. 11.055 trillion in June 2019. The central government’s total debt increased by 30 percent or Rs. 7.508 trillion to Rs. 32.240 trillion in August 2019 compared to Rs. 24.732 trillion in August 2018.
According to analysts, the absence of sufficient external financing, excessive reliance on domestic resources for financing of fiscal imbalances is increasing the debt burden. They said that debt stocks are likely to increase further as Pakistan has already obtained a $6 billion bailout package from the International Monetary Fund.
Tax collection in the first quarter of the current fiscal year stood at Rs. 960 billion, which was lower than the set target. Public debt is rising due to increasing financing needs of the government to reduce the budget deficit following a shortfall in revenue collection, rise in government spending and high-interest payments on domestic debt.