Business

Govt debt swells 34.1% in April to Rs58.6tr

Published

2 years ago

Farwa

Debt swells due to growing interest payments, rupee depreciation.
Debt rises by 22.5% in 10 months (July-April) of this fiscal year.
Govt is likely to set budget deficit target of 6.4% of GDP.

KARACHI: Owing to high funding requirements, a lack of dollar inflows, currency depreciation, and growing interest payments amid a tight monetary policy, the government’s debt grew 34.1% at the end of April from a year earlier, The News reported citing central bank’s data.

According to the data released by the State Bank of Pakistan (SBP), the total debt reached Rs58.598 trillion as of April 30, compared with Rs43.705 in the same period last year.

The debt increased by 2.6% month-on-month as it stood at Rs57.123 trillion in March.

The public debt is growing at a faster pace owing to the increasing financing needs of the government. The foreign currency inflows remained dried amid the stalled International Monetary Fund (IMF) loan programme.

The centre was forced to take on more domestic debt as a result of the low revenue and the excessive expenditure requirements. Additionally, the weaker currency caused an increase in external debt measured in rupees.

The debt climbed by 22.5% in 10 months (July-April) of this fiscal year. It had come to Rs47.832 trillion by the end of June. According to the SBP’s data, the increase in public debt was caused by an increase in external debt, which is a result of currency depreciation.

Over the course of a year, the rupee declined by about 53%. In April 2023, it was trading at 283 per dollar, up from 185 in the same month the year before.

At the end of April, the domestic debt surged by 26.4% year-on-year to Rs36.549 trillion. The domestic debt rose by 17.57% during the 10 months of this fiscal year.

The foreign debt sharply increased by 49.1% to Rs22.050 trillion as of April from Rs14.791 trillion a year ago. The external debt grew by 31.6% in the period July–April fiscal year 2022-23.

Pakistan is caught in the debt trap because of its unsustainable levels of domestic debt and markup payments, according to analysts. The government can choose to restructure the debt in order to create fiscal space to boost the economy.

However, there is a significant chance that the exercise may harm domestic banks and the economy as a whole.

‘Unrealistic revenue and fiscal deficit targets’

The government may set unrealistic revenue and fiscal deficit targets in the upcoming budget for the fiscal year 2023-24, according to analysts, who also expressed concern about rising interest costs for domestic debt.

The government is likely to set a tax revenue collection target of Rs9-9.2 trillion for FY2024 (8.6% of GDP), which is up 21% from the target of Rs7.5 trillion for FY23 and 29% higher than expected tax collection in the current fiscal year, said Topline Securities in a report.

“Total tax collection for FY23 is expected to clock in at Rs7-7.1 trillion below the target of Rs7.5 trillion due to the economic slowdown,” it said.

“Government is likely to set aside Rs7.6-8 trillion (7.1-7.5% of GDP) for interest payment for FY24 budget. This is against Rs5.2 trillion (6.2% of GDP) likely in FY23,” it added.

Rising debt and record high-interest rates are responsible for a huge jump in markup payment from Rs3.2 trillion in FY22 to Rs8 trillion in FY24, an increase of 151% in two years limiting government to spend on development, health, education, etc, according to the report.

“This is alarming as markup expenses for FY24 will be 88% of total tax revenue compared to the last 10-year average of 48%,” it noted.

For FY24, the government is likely to set a budget deficit target of 6.4% of GDP, or Rs6.8 trillion.

“We believe that the main reason for the higher budget deficit in FY24 will be higher markup costs and inaccessibility to bumper FY24 SBP profits due to changes in the SBP Act in early 2022,” the Topline report stated.

Business

The amount of trade between Saudi Arabia and Pakistan hits $700 million.

Published

4 hours ago

Farwa

Through the Special Investment Facilitation Council (SIFC), Pakistan’s trade connections with Saudi Arabia have grown significantly, with bilateral trade volume rising from $546 million to $700 million and exports to the Kingdom growing by 22%.

As bilateral economic cooperation continues to grow, Saudi investors have shown a strong interest in Pakistan’s construction, energy, agricultural, and information technology sectors. The objective for exporting IT services between the two countries has been raised from $50 million to $100 million.

Saudi Arabia has set up a help desk dedicated to making it easier for Pakistani IT companies to register in the Kingdom in order to expedite commercial procedures. The goal of this program is to speed up economic collaborations between the two countries and lower administrative barriers.

The well-known Saudi restaurant chain AlBaik has revealed plans to open locations in Pakistan, which is a big step for the food service industry and should lead to the creation of new job possibilities in the area.

Officials have noted that stronger business links between the two countries lead to greater economic stability, and the SIFC has played a crucial role in promoting these trade advancements. For bilateral trade and investment projects, the Council remains a crucial facilitator.

According to a trade official with knowledge of the developments, “the establishment of dedicated support mechanisms, such as the help desk for IT companies, demonstrates a commitment to long-term economic partnership,” The goal of these programs is to improve the conditions for commercial collaboration between the two nations.

The increasing amount of trade and the diversity of investment sectors show that Saudi Arabia and Pakistan’s economic ties are changing as both countries seek to deepen their business alliances in a number of industries.

Business

After more than 50 years, Bangladesh and Pakistan resume direct trade.

Published

4 hours ago

Farwa

After more than 50 years, the two governments will resume direct bilateral trade, with Bangladesh’s food ministry announcing Sunday that it will receive a supply of 25,000 tonnes of rice from Pakistan next month.

After former Prime Minister Sheikh Hasina was overthrown last August, relations between Bangladesh and Pakistan have begun to improve after decades of tense relations.

Since then, there have been increased bilateral interactions between Bangladesh and Pakistan. Nobel laureate Muhammad Yunus, the interim government’s senior adviser, has met twice with Pakistani Prime Minister Shehbaz Sharif.

According to the food ministry, Dhaka completed an agreement earlier this month to import grains from Pakistan.

“On March 3, the first shipment of 25,000 tonnes will reach Bangladesh,” Zia Uddin Ahmed, a ministry assistant secretary, told Arab News.

“This is the first time that Bangladesh has started importing rice from Pakistan at the government-to-government level since 1971.”

Following direct maritime contact between the two South Asian countries in November—a Pakistani cargo ship stopped in Bangladesh for the first time since 1971 with imports and exports arranged by private companies—their trade relations grew.

Resuming trade with Pakistan is a significant step for Bangladesh, according to Amena Mohsin, a lecturer at North South University and a specialist in international relations.

“We want to see progress in our bilateral relationship with Pakistan. Most significantly, we are currently going through a low point dispute with India, even though we constantly diversify our partnerships.

This most recent move to purchase rice from Pakistan is really significant in this context,” she told Arab News.

Business

The total amount of Pakistan’s liquid foreign reserves is $15.95 billion.

Published

3 days ago

Farwa

As of February 14, Pakistan’s total liquid foreign reserves were $15,947.9 million, with the State Bank of Pakistan’s (SBP) holdings being $11,201.5 million.

Official figures for the week ending February 14, 2025, show that the central bank’s liquid foreign exchange reserves rose by $35 million to $11,201.5 million.

Commercial banks maintained net foreign reserves of $4,746.4 million during the period under review, according to the breakdown of foreign reserves.

The nation’s total liquid foreign reserves as of the week ending February 07, 2025, were $15,862.6 million.

Of these, the central bank held $11,166.6 million in foreign reserves, while commercial banks kept $4,696 million in net reserves.