Islamabad: Pakistan government’s debt increased by PKR 4 trillion, or about 7.7 percent, to close to PKR 55 trillion in January 2023, data from the State Bank of Pakistan (SBP) showed, Pakistan-based Dawn newspaper reported. PKR 42.39 trillion in January 2022, which means it has grown by 30 percent over the previous year. Meanwhile, household debt rose to 34.3 trillion Pakistani rupees by the end of January, up 3.4 percent from a month ago and nearly 25 percent from the year-ago figure.
According to the Dawn report, external debt stood at PKR 20.69 trillion, registering an increase of 15.7 percent in a month and 38 percent in a year. Pakistan is heavily dependent on debt. The SBP data shows that during the first seven months (July to January) of the current fiscal, the central government’s domestic debt increased by PKR 3.218 trillion, a growth of 10.4 per cent.
The government’s borrowing through long-term, high-cost Pakistan Investment Bonds (PIBs) reached PKR 20.9 trillion by the end of January from PKR 15.59 trillion a year ago, registering a 34 percent increase. According to Don, long-term, high-yielding borrowings have already become a burden for the government, draining most of development spending.
By the end of June 2023, Pakistan’s interest-revenue ratio, which was the worst in the region (right behind Sri Lanka) at 42 per cent, will rise to 54 per cent. This means the interest rate payment will increase from PKR 4 trillion to PKR 5.4 trillion.
The recent hike in SBP’s policy interest rate by 300 basis points will also impact the government’s ability to spend on development and other basic needs. The central government’s external debt grew more aggressively during the year to January 2023, rising by 38 per cent.
According to Dawn, during the current financial year till January, external debt increased by 23.5 per cent or Rs 3.939 trillion. Due to the depreciation of the rupee, external debt has increased at a very high pace and will increase significantly in the next month. The government uncapped the exchange rate last month, after which the dollar rallied by nearly 20 per cent, meaning the government would have to arrange for this extra money to repay external debt.
According to Dawn, the SBP data also showed that the total debt of the central government, which includes both domestic and external debt, increased by 15 per cent (Rs 7.158 lakh crore) during July-January. Dawn had recently reported that Pakistan’s external debt servicing has increased by 70 per cent in the first two quarters of 2022-23, worsening the dollar shortage. In the first half of the fiscal year, Pakistan paid USD 10.21 billion in external debt servicing, while in the same period of 2021-22, the country paid USD 6 billion, data from the State Bank of Pakistan (SBP) showed. got to know.