Pakistan’s public debt skyrocketed by a staggering Rs4.64 trillion in just the first nine months of the outgoing fiscal year, highlighting the country’s ongoing fiscal challenges. This brought the total public debt to an overwhelming Rs67.53 trillion by the end of March 2024, up from Rs62.88 trillion at the close of June 2023. Despite this massive increase, the rate of debt accumulation exhibited a significant slowdown, a development attributed to exchange rate stability.
The breakdown of the public debt illustrates a notable shift, with the total domestic debt reaching Rs43.43 trillion by March 2024 and the external component amounting to Rs24.09 trillion. This increase in domestic debt, which rose by Rs4.63 trillion, sharply contrasts with the relatively modest Rs22 billion growth in external debt over the same period. The deceleration in debt accumulation from Rs10 trillion in the first nine months of the previous fiscal year to Rs4.64 trillion in the current period marks a 54% reduction, underscoring the impact of stabilized exchange rates.
A closer look at the domestic debt reveals a substantial increase in permanent debt, encompassing medium to long-term instruments such as Pakistan Investment Bonds (PIBs), Government Ijara Sukuks, and Prize Bonds. This segment of debt stood at Rs31.2 trillion, accounting for 72% of the total domestic debt portfolio by the end of March 2024, with a notable increase of Rs5.7 trillion during the fiscal year. Meanwhile, floating debt, which includes short-term instruments, was recorded at Rs8.5 trillion, and unfunded debt amounted to Rs2.8 trillion.
On the external front, the debt portfolio saw inflows of $1.7 billion from multilateral sources, with significant contributions from the International Monetary Fund (IMF) at $1.9 billion, the World Bank at $1.4 billion, the Asian Development Bank (ADB) at $657 million, and the Asian Infrastructure Investment Bank (AIIB) at $300 million. Bilateral debt also saw an increase, with $2 billion in deposits from Saudi Arabia and an overall rise of $648 million. Notably, 53% of external debt comprised concessional loans from multilateral bodies, while bilateral loans constituted 21%.
Debt servicing costs have been substantial, with public debt servicing recorded at Rs5.5 trillion in the first nine months of FY24, compared to a budgeted estimate of Rs7.3 trillion. This included Rs4.8 trillion in interest expenses on domestic debt, a 55% increase from the previous year. Interest payments on external debt were Rs710 billion, below the budgeted Rs872 billion. Additionally, the government repaid $5.33 billion in external public debt, including $2.8 billion to multilateral bodies, $2 billion in bilateral debt, and $0.6 billion against Naya Pakistan Certificates.
The Economic Survey concludes with the government’s strategy to reduce the debt burden to sustainable levels through budget surpluses, low inflation, and exchange rates grounded in economic fundamentals. This approach, if successfully implemented, could provide the stability needed to manage Pakistan’s growing public debt effectively.
