Pakistan’s Debt Reaches Threatening Level After Breaking Another Historic Record

Pakistan’s domestic debt crossed the Rs. 50 trillion mark by end of October 2022.

According to the data released by the State Bank of Pakistan (SBP), the domestic debt of the country surged to Rs. 50.15 trillion by October 2022 as compared to Rs. 40.2 trillion reported by end of the same month last year, showing a whopping increase of Rs. 10 trillion in debts merely in one year.

During the period, the debt generated through Pakistan Investment Bonds (PIBs) increased to Rs. 19.2 trillion from Rs. 14.7 trillion. Debts raised through Naya Pakistan Certificates soared to Rs.17.6 trillion from Rs. 13.6 trillion the last year.

The financing through Government Ijara Sukuk also increased to Rs. 2.4 trillion from Rs. 1 trillion.

The upward revision in the policy rate also enhanced the debt and financing from domestic sources. Similarly, the federal government’s external debt increased by 5 percent or $9.037 trillion during the July-October fiscal year of FY23.

In October 2022, the government’s external debt stock reached Rs. 17.65 trillion, up from Rs. 16.747 trillion in June. The total external debt is made up of long-term loans worth Rs. 17.419 trillion and short-term loans worth Rs 231.3 billion. According to SBP, the debt’s US dollar exchange rate is calculated at Rs. 220.42 in October 2022, compared to Rs. 204.378 in July 2022.

With debt levels crossing beyond-shocking levels on a monthly basis, the government is looking for new financing sources. The Saudi Fund for Development (SFD) recently extended its $3 billion deposits with Pakistan for another year. The amount was initially deposited by the SFD for one year in December 2021 as part of an agreement between the SFD and SBP to replenish Pakistan’s depleting foreign exchange reserves.

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