Domestic debt goes up by 11.7pc

KARACHI: The federal government’s domestic debts have increased by 11.7 per cent to Rs24,780 billion from February 2020 to February 2021, the State Bank of Pakistan reported on Monday.

Despite an increase in revenue collection in a year, domestic debt has gone up by Rs2,596bn or 11.7pc from Rs22,184bn in Feb 2020, reflecting higher expenses and widening of fiscal deficit.

According to the latest SBP data, the federal government’s domestic debt has increased by 6.4pc to Rs1,498bn during the eight months (June-February) of the current fiscal year (8MFY21). In June 2020, domestic debt was Rs23,282bn.

However, the federal government’s total debt including foreign debt reduced this figure as it noted an increase of 9.6pc during the last 12 months.

Total debt including foreign debt rose to Rs36,612bn in Feb 2021 compared to Rs33,417bn in Feb 2020 — an increase of Rs3,195bn or 9.6pc.

The growth in total debt during the current fiscal FY21 was significantly low as it increased by 4.3pc or Rs1,505bn during 8MFY21.

Foreign debt (in terms of rupees) during the current fiscal FY21 did not increase to any significant level as it reached Rs11,832bn in Feb FY21 compared to Rs11,232bn in Feb FY20 — an increase of Rs600bn during the last 12 months.

Interestingly, the foreign debt increased by just Rs8bn to Rs11,832bn during 8MFY21 compared to Rs11,824bn in 8MFY20.

The data of foreign liabilities was not updated by the State Bank which may show higher amount of total debt and liabilities. Recently, Pakistan borrowed $2.5bn by floating Eurobonds in the international market.

Most of the government’s domestic borrowing is coming from the local banks and corporate sector. Since the SBP has stopped lending to the federal government for the last two years, the government depends largely on domestic bonds including the Pakistan Investment Bonds (PIBs) and Treasury bills to raise liquidity.

The government has also allowed foreign investors to open rupee account and invest in domestic bonds. During the current fiscal year foreign investors purchased $240m (Rs36.960bn) PIBs.