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Public debt up by 22% to nearly Rs60tr in July 2023

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1 year ago

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  • Total debt up by 22.11% year-on-year to Rs61.75 trillion.
  • Total govt debt was Rs50.57 trillion in July 2022.
  • Month-on-month debt increased by 1.49%.

KARACHI: The federal government’s total debt surged to nearly Rs60 trillion, primarily attributed to borrowing from domestic and foreign sources to cover the fiscal deficit, The News reported Wednesday. 

The total debt of the government was up by 22.11% year-on-year to Rs61.75 trillion in July 2023, compared to Rs50.57 trillion in July 2022, the State Bank of Pakistan (SBP) data showed on Tuesday.

On a sequential basis, the debt of the government witnessed an increase of 1.49% month-on-month compared to Rs60.84 trillion in June 2023. The increase in debt burden is primarily attributed to borrowing from domestic and foreign sources to cover the fiscal deficit.

The central bank data showed the larger portion of the debt was domestically clocked in at Rs39.02 trillion, signifying a growth of 24.08% year-on-year, comprising Rs29.59 trillion long-term debt and Rs9.29 trillion short-term debt while the remaining Rs22.73 trillion was external.

By the end of July 2023, the government’s long-term debt increased by 24.44% year-on-year to Rs29.59 trillion as compared to Rs23.78 trillion recorded in the same period a year ago. Similarly, the short-term debt jumped by 27.14% year-on-year as opposed to Rs7.31 trillion in July 2022.

Within the long-term domestic debt, the Pakistan Investment Bonds (PIBs) accounted for Rs22.06 trillion, up by 27.40% year-on-year. Meanwhile, in the short-term domestic debt, Market Treasury Bills (MTBs) amounted to Rs9.22 trillion, up by 27.14% YoY.

Borrowing through Naya Pakistan Certificates (NPCs) has risen by 26.71% YoY to stand at Rs139 billion in July 2023. A breakup of the government’s external debt shows that nearly Rs22.67 trillion came from long-term loans while Rs65.2 billion came from short-term loans.

The country’s total debt and liabilities rose by 29% to Rs77.1 trillion in the last fiscal year of 2022/23. 

At the end of the last fiscal year, the country’s debt and liabilities, including domestic and foreign, totalled Rs77.104 trillion, up from Rs59.772 trillion the year before. 

The total debt and liabilities as a percentage of GDP increased to 91.1% in 2022/23. The nation’s debt rose 28.4% to Rs72.991 trillion, while the liabilities increased 34.6% to Rs4.587 trillion in FY2023.

To finance its expanding budget deficit and to cover the cost of repaying its domestic debt, the government borrowed heavily from domestic sources, namely commercial banks. 

The government borrows funds from commercial lenders, multilateral institutions, the Paris Club, and international financial institutions to meet budget deficits, finance the current account gaps, and build up foreign exchange reserves. 

However, a steep decline in the value of the local currency caused the amount of foreign debt to rise, reaching Rs32.495 trillion in FY2023. The rupee’s value fell by 41% during the last fiscal year.

In July, the International Monetary Fund (IMF) approved a fresh $3 billion bailout for Pakistan’s struggling economy, which had been dangerously near to defaulting on its debt. 

The IMF and friendly nations provided the country with $4.2 billion in financial support in July. The country received inflows of $2.0 billion from the Kingdom of Saudi Arabia, $1.2 billion from the IMF, and $1 billion from the United Arab Emirates.

Analysts said that it appears that the government’s budgetary borrowings remained high this year and the country’s projected FX inflows from bilateral and multilateral sources will be the only way to cover its gross external funding needs.

The SBP anticipates that the foreign exchange reserves will rise to $12 billion by the end of this fiscal year, although the reserves could fall if there is significant pressure on the current account.

Due to anticipated increases in debt servicing expenses amid the high-interest rate environment in the nation, our budget deficit appears to be on an upward trend. Imports have not yet been fully opened, but if they are, tax revenues will increase.

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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