Pakistan’s Debt Has Increased by 11.5% Over Last Year

The central government’s total debt increased by 11.5 percent year-over-year (YoY) in August 2021.

According to data released by the State Bank of Pakistan (SBP), the government’s total debt rose by Rs. 4.111 trillion YoY to Rs. 39.771 trillion in August this year.

Meanwhile, external debt rose by 10.8 percent to Rs. 13.436 trillion in August 2021 from Rs. 12.123 trillion in the same month last year, an increase of Rs. 1.313 trillion.

Similarly, in August 2021, total external debt was Rs. 13.436 trillion, as compared to Rs. 12.432 trillion in June 2021. This increase was mainly due to the appreciation of the US Dollar against the Pakistani Rupee, as the PKR has lost more than 11 percent against the USD since May.

On a monthly basis, the central government’s total debts fell by Rs. 99 billion, or 0.2 percent, to Rs. 39.771 trillion in August, as compared to Rs. 39.870 trillion in July.

In the July-August period, the domestic debt of the central government surged by Rs. 70 billion to Rs. 26.335 trillion in August, as compared to Rs. 26.265 trillion in June.

The government’s main source for borrowing was Pakistan Investment Bonds (PIBs). However, this declined in the July-August period by Rs. 464 billion to Rs. 14.126 trillion in August from Rs. 14.590 trillion in June.

In response to some media reports, the Ministry of Finance has clarified that the debt has increased in line with the fiscal deficit. However, the positive development is Pakistan’s total debt to GDP has decreased to 83.50% of GDP on 30th June 2021 from 87.6% on 30th June 2020. Both domestic and external debts have depicted a downward trend from last year.

The domestic debt declined to 55.1% of GDP from 56% last year. Similarly, external debt to GDP was recorded at 28.5% of GDP from 31.6% last year. It is pertinent to mention that the best way to evaluate the debt trend is through debt to GDP measure.

Borrowing through PIBs rose by Rs. 735 billion YoY to Rs. 14.126 trillion in August, as compared to Rs. 13.391 trillion in the same month last year.

In July, the SBP released data stating that Pakistan’s total debt and liabilities increased to Rs. 47.829 trillion until June 2021.

Amid the ongoing surge in its imports, Pakistan’s trade deficit widened by 100.6 percent year-over-year (YoY) in the first quarter of Fiscal Year (FY) 2021-22.

Meanwhile, the foreign exchange reserves held by the SBP fell by 1.27 percent on a weekly basis, according to data released last Thursday. On September 24, reserves held by the SBP fell by $249 million to $19,294.5 million from the reserves recorded on September 17.