KARACHI: The federal government’s total debt stocks rose to an all-time high level of Rs 59 trillion at the end of May 2023 because of massive borrowing from domestic and external resources.
According to the State Bank of Pakistan (SBP), the central government’s total debt (domestic and external) surged by 23 percent during the first 11 months of this fiscal year (FY23).
Overall, the federal government’s total debt stock increased to an all-time high level of Rs 58.962 trillion by the end of May 2023 compared to Rs 47.832 trillion as of June 2022, depicting an increase of Rs 11.13 trillion.
Govt debt stocks rise to Rs58.6trn
During the period under review, the central government’s borrowings from domestic resources mounted up by 19 percent or Rs 5.969 trillion to Rs 37.54 trillion in May 2023 as against Rs 31.085 trillion in June 2022.
The government’s domestic borrowings were dominated by long-term loans worth Rs 29.48 trillion and Rs 7.433 trillion short term borrowing.
The external debt in rupee terms rose by 31 percent or Rs 5.161 trillion during the first eleven months of this fiscal year. The total stocks of external debt rose to Rs 21.908 trillion at the end of May 2023 up from Rs 16.747 trillion in June 2022.
The massive change in the external debt is mainly due to sharp devaluation of Pak Rupee to the US dollar during this fiscal year. According to the SBP, US dollar, last day Weighted Average Customer Exchange Rates was 204.3784 in June 2022, while it stood at 286.3835 in April 2023.
Although the country has repaid a healthy amount to international lenders during this fiscal year, it is still looking for new avenues for fresh borrowing to avoid default and build the sliding foreign exchange reserves.
Recently, the IMF has approved a Standby Arrangement (SBA) of $3 billion for Pakistan to reduce the pressure on external accounts. In addition, with the approval of a fresh program from the IMF, a number of other lenders will also provide financing to Pakistan. These inflows will increase the country’s external debt.
On Year on Year basis, the central government’s total borrowing from domestic and external resources was increased by 32 percent or Rs 14.32 trillion. The federal government’s total debt stock rose from Rs 44.64 trillion in May 2022 to reach Rs 58.96 trillion in May 2023.
The country is facing a serious financial crunch and looking for fresh foreign inflows to strengthen the foreign exchange reserves, which stood at $ 9.3 billion including $4 billion of the SBP and $5.2 billion of commercial banks.
Copyright Business Recorder, 2023
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