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KARACHI: The federal government’s total debt (domestic and external) stocks rose over Rs 1 trillion during the first two months of this fiscal year (FY22).

The State Bank of Pakistan (SBP) Tuesday reported that the country’s domestic and external debt continued to increase and went up by 3 percent during July-Aug of FY22. The central government’s domestic and external debt stocks mounted up by Rs 1.073 trillion to touch a new peak level of Rs 39.77 trillion in August 2021 up from Rs 38.697 trillion in June 2021.

Analysts said that the federal government is borrowing from domestic as well as external resources to finance the rising fiscal deficit. The massive borrowing has increased the debt burden on the economy. They said that most of the debt, during this fiscal year, has been obtained from international financial institutions as the country’s current account deficit is deteriorating followed by higher import bill. Meanwhile, the federal government’s reliance on domestic resources is very minimal.

In a detailed analysis, the major increase was recorded in external debt, which rose by 8 percent. The central government’s external debt rose to Rs 13.436 trillion in August 2021 compared to Rs 12.432 trillion in June 2021, depicting an increase of Rs 1.003 trillion in the first two months of this fiscal year. External debt comprised Rs 13.227 trillion of long-term debt and Rs 208.6 billion of short-term debt.

The exchange rate volatility is also a major factor of higher increase in the external debt. Exchange rate was Rs 157.31 in June 2021 as against Rs 166.26 in August 2021. The federal government’s domestic debt slightly increased by Rs 69.6 billion to Rs 26.345 trillion in August 2021, up from Rs 26.265 trillion in June 2021. The total domestic debt stocks are composed of permanent debt, unfunded debt and floating debt.

Out of total domestic debt, long term debt stood at Rs 19.041 trillion, and short-term loans Rs 7.238 trillion. Permanent debt stood at Rs 15.398 trillion, unfunded debt Rs 3.636 trillion and foreign currency loans Rs 7.1 billion.

Copyright Business Recorder, 2021

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