PKR depreciation, borrowing: Debt stocks soar to Rs55trn by Jan-end

KARACHI: The country’s total (domestic and external) debt stocks rose to the Rs-55 trillion mark at the end of January because of massive borrowing and Pak rupee depreciation.

According to the State Bank of Pakistan (SBP), the central government’s total debt stocks recorded an increase of 15 percent during the first seven months of current fiscal year (FY23).

With current surge, total debt stocks reached new peak level of Rs 54.942 trillion by the end of Jan 2023 compared to Rs 47.784 trillion as on June 30, 2012, depicting an increase of Rs 7.157 trillion.

Analysts said in the absence of external financing, the government has excessive reliance on domestic resources to meet the financing requirement. In addition, the Pak Rupee depreciation against the US dollar also contributed largely in the recent increase in the external debt.

The detailed analysis revealed that the federal government’s total debt stocks also recorded a sharp increase of 7.7 percent in Jan 2023 alone due to Pak rupee depreciation against US dollar. Average US dollar exchange rate was Rs 267.94 in Jan 2023 versus Rs 226.47 in Dec 2022.

Jul-Jan: $6.134bn borrowed from multiple sources

Overall total (domestic and external) debt stocks mounted up by Rs 3.94 trillion to Rs 54.942 trillion in Jan 2023 compared to Rs 50.996 trillion in Dec 2022.

Most of the increase was recorded in external debt due to Pak rupee depreciation. During the first seven months of this fiscal year, external debt also went up by 23 percent or Rs 4 trillion to Rs 20.687 trillion in Jan 2023 as against Rs 16.747 trillion in June 2022. External debt includes long-term loans worth Rs 20.595 trillion and short term loans worth Rs 92 billion.

The federal government’s domestic debt mounted up by 10 percent to historical level of Rs 34.255 trillion in Jan 2023 up from Rs 31.037 trillion in June 2022. Domestic debt comprising Rs 27.514 trillion of long term loans and Rs 6.691 trillion short term debt.

According to the State Bank, the total domestic debt stocks are comprising permanent debt, unfunded debt and floating debt. In addition previously Foreign Exchange Bearer Certificates, Foreign Currency Bearer Certificates, Dollar Bearer Certificates and Special US Dollar Bonds held by the residents, were the part of external debt liabilities but from June-08 & onward it is the part of domestic debt.

The central government’s external debt is likely to further rise in coming months as the federal government is making efforts for the release of $1 billion tranche of Extended Fund Facility (EFF) of the IMF to avoid default.

Copyright Business Recorder, 2023