LAHORE: In the first quarter of the current fiscal year, Punjab’s total government debt saw a slight surge of 0.1 percent (Rs 1.7 billion) compared to the end of June 2024. This increase is mainly on account of forex loss of around Rs 8 billion and a decrease in net debt position amounting to Rs 6.3 billion.
As per a report released by the Punjab Finance Ministry for the period between July 1, 2024, and September 30, 2025, at the end of the first quarter, the debt stock of the Punjab government stood at Rs 1,679 billion, out of which Rs 1,677 billion is from external lenders and Rs 1.6 billion is from domestic sources. These loans collectively are 2.49 percent of Punjab’s Gross State Domestic Product (GSDP). Moreover, Punjab’s GSDP saw a significant increase from Rs 57,476 to Rs 67,289 billion in the said period, a surge of Rs 9,813 billion.
The report observed that Punjab’s total debt stock surged from Rs 1,677.1 to Rs 1,678.8 during the first quarter of FY 2024-25. However, the domestic loans showed a decline from Rs 1.7 billion (reported in June 2024) to Rs 1.6 billion. In contrast, external loans witnessed a gain from Rs 1,675.4 billion (reported in June 2024) to Rs 1,678.8 billion.
Q2FY24 Punjab govt’s debt stock declines modestly
The report noted that the outstanding debt stock at the end of September 2024 excludes provincial guarantees (awarded to various Punjab government entities) and commodity debt. The outstanding commodity debt stood at Rs 103 billion at the end of September 2024, which is mostly secured by wheat stock procured by the government for commodity operation along with a Federal government guarantee in the form of a Cash Credit Limit (CCL). The debt portfolio predominantly comprises borrowing from external sources with 99.9 percent coming from multilateral agencies and bilateral loans contracted mostly on concessional terms (low cost and longer tenor), procured mainly for infrastructure development and reform support whereas only 0.1 percent of the debt portfolio is domestically borrowed from the Federal government, the report stated.
Moreover, the report highlighted that the government’s external debt is derived mainly from three key sources, with around 55 percent coming from the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD), 21 percent from the Asian Development Bank, 20 percent from China and 4 percent from other sources.
As per the report, the agriculture, irrigation and livestock sector remained the major recipient of government borrowing, as its share constitutes 25 percent of the total outstanding followed by transport and communication 21 percent, education 20 percent, urban and community development at 15 percent, governance 10 percent, health 5 percent and others 4 percent.
Moreover, it pointed out that the government’s debt portfolio is dominated by foreign currency borrowings, with total exposure residing at 99.9 percent of the debt portfolio. Currency-wise exposure is denominated in USD (70 percent) followed by Special Drawing Rights (22 percent), Japanese Yen (5 percent) and Chinese Yuan (2 percent). Hence, the report noted, the government’s debt by its composition remains exposed to foreign exchange risk; owing to this, any change in parity of the dollar and other foreign currencies with the rupee has a pronounced impact on the valuation of Punjab’s debt portfolio when translated into rupee terms. The report also noted that overall, a significant portion (73 percent) of the debt portfolio comprises loans contracted on fixed interest rates and is not exposed to changes in international interest rates. However, the floating rate portion (27 percent) remains subject to periodic revision of interest rates since these loans attract floating reference rates (ie, SOFR, TONA, EURIBOR, etc).
Copyright Business Recorder, 2024
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