Public debt rises to Rs68.9tr in FY24

KARACHI: Pakistan’s government debt increased to Rs68.9 trillion in the last fiscal year 2024, which ended on June 30, the central bank data showed on Thursday.

This rise was attributed to high gross financing needs, persistent budget deficits, low revenue collection, and higher interest payments.In June 2024, the government added Rs8 trillion, a 13 per cent increase to total debt. The central government debt increased by 1.6 per cent or Rs1.09 trillion from the previous month, going from Rs67.8 trillion to Rs68.9 trillion.

The total central government debt as a percentage of the gross domestic product fell to 65 per cent in FY24 from 73 per cent in FY23.The government’s domestic debt in FY24 increased by 21.5 per cent to Rs47.2 trillion. The debt rose by 2.0 per cent on a month-on-month basis.

Saad Hanif, the head of research at Ismail Iqbal Securities, stated that a combination of persistent fiscal deficits and the rising costs of debt servicing due to high interest rates and a weakening rupee drove the increase in debt.

“The government reliance on borrowing has intensified due to limited revenue collection, compounded by inflationary pressures and financial support to loss-making public sector enterprises,” Hanif added.

“High interest rates on existing debt have increased the cost of servicing debt. This creates a cycle where new debt is often issued to pay off the interest on old debt, leading to a net increase in total debt levels,” he added.

“The reduction in debt as a percentage of GDP may reflect some recent improvements or adjustments, but the underlying structural issues remain a concern.”The SBP’s data showed that the country’s external debt decreased by 1.3 per cent to Rs21.8 trillion in FY24. However, it slightly increased by 1.0 per cent on a month-on-month basis.

A stable exchange rate and low credit ratings, which prevented international commercial banks from giving Pakistan fresh loans, were the main causes of the reduction in foreign debt. Pakistan concluded a $3 billion short-term loan programme in April, which helped avert a potential sovereign default.

The total debt and liabilities of Pakistan increased by 11 per cent to Rs84.9 trillion in the last fiscal year. The debt and liabilities as a percentage of GDP decreased to 80.1 per cent of the country’s gross domestic product (GDP) in the fiscal year 2024, down from 91.2 per cent in the previous year.

Specifically, the country’s total debt rose by 11.4 per cent to Rs81.928 trillion in fiscal year 2024, comprising 77.3 per cent of the GDP, compared to 87.7 per cent in FY23. Additionally, liabilities as a whole amounted to Rs4.644 trillion, reflecting a 1.2 per cent increase from the previous year.