KARACHI: The country’s domestic debt servicing posted a notable increase of over 38 percent during the first five months of this fiscal year (FY21).

According to State Bank of Pakistan’s statistic, servicing of total domestic debt surged to Rs 921 billion during July-Nov of FY21 compared to Rs 666 billion in same period of the last fiscal year (FY20), depicting an increase of 38.4 percent or Rs 255 billion. Analysts said that the rise in the domestic debt servicing is primarily stemmed from permanent debt due to higher coupon payments of fixed-rate Pakistan Investment Bonds (PIBs) and 12-month Government of Pakistan Market Treasury Bills (MTBs).

The detailed analysis revealed that debt servicing on permanent debt rose by 77 percent or Rs 184 billion to Rs 421 billion during first four months of this fiscal year against Rs 237 billion in corresponding period of the last fiscal year.

During the period under review, servicing on floating debt increased by 31 percent or Rs 82 billion to Rs 351 billion. In addition, debt servicing of unfunded loans declined by 7 percent to Rs 149 billion in July-Nov of FY21 compared to Rs 159 billion in same period of last fiscal year.

The federal government's domestic debt is continued to surge and rose by Rs 828 billion to Rs 24.11 trillion mark in July-Nov of FY21 due to massive borrowing for financing of fiscal deficit.

The most of the rise in government domestic debt was witnessed from the banking system, of which the entire mobilization of the debt came from scheduled banks as the government continued to retire SBP debt during the initial months of this fiscal year.

Copyright Business Recorder, 2021