Pakistan’s Public Debt Increased by Rs. 2.9 Trillion Due to A Single Factor

The depreciation of the exchange rate added around Rs. 2.9 trillion (20 percent of the increase) to the public debt during July 2018-June 2021, according to the Ministry of Finance.

Documents from the ministry revealed that total public debt increased by Rs. 14.9 trillion during July 2018-June 2021.

The break-up of the increase in the public debt is as follows:

Financing of Primary Deficit

The impact of the retardation of the economy due to the pandemic resulted mainly in higher than estimated primary deficits, and Rs. 3.4 trillion (23 percent of the increase) was borrowed for the financing of the primary deficit.

Interest Expenses

The government paid Rs. 7.5 trillion against interest servicing, which explains 50 percent of the increase in the total public debt.

Currency Devaluation Impact

The depreciation of the exchange rate added around Rs. 2.9 trillion (20 percent of the increase) to the public debt. This increase was not because of borrowing but due to the re-valuation of the external debt in terms of rupees after currency devaluation.

Cash Management & Others Factors

An amount of Rs. 1.0 trillion (seven percent of the increase) was on account of the increased cash balances of the government to meet emergency requirements. However, this increase in the debt was offset by a corresponding increase in the government’s liquid cash balances.

The Cabinet Division constituted an inquiry commission on debt in June 2019 to conduct an inquiry into the period from February 2008 to September 2018. However, the commission has not submitted its inquiry report to the Cabinet Division to date.



  • close
    >