ISLAMABAD: Pakistan’s public debt has increased to Rs 52.721 trillion by December 2022 from Rs 49.194 trillion end of June 2022, according to Public Debt Bulletin for July-December 2022 uploaded by the Finance Ministry on Friday.

According to debt bulletin domestic debt increased to Rs 33.116 trillion by the end of December 2022 from Rs 31.027 trillion and external debt to Rs 19.905 trillion from Rs 16.157 trillion. The domestic debt stood at 63 percent and external debt 37 percent with maturity profile of 28 percent I year followed by 21 percent 2-3 years, 16 percent 4-5 years, 18 percent 6-7 years, 8 percent 9-10 years and 10 percent 10 years.

The total debt of the government stood at Rs 47.964 trillion and government deposits with banking system stood at Rs 4.757 trillion by end December 2022. Finance Ministry stated that the reasons for increase in total public debt were; (i) debt stock arise out of borrowings to meet the fiscal deficit or to alter the cash balance constitute economic flows arising out of transactions; whereas changes in total public debt stock arising out of movements in exchange rate constitute other economic flows;(ii) the transactional effect during July-December 2022 increased due to higher interest expense owing to rising interest rate environment. The impact of other economic flows during July-December 2022 was mainly due to rupee depreciation against US dollar by almost 11 percent which resulted in increase in total public debt by Rs 2,268 billion.

The Ministry said that high levels of external debt can pose severe challenges in times of high current account deficit, low foreign exchange reserves, and volatile exchange rate. Large external payments in the wake of low foreign exchange reserves can pose liquidity problems and even destabilize the exchange rate which in turn can increase the burden of external loans measured in local currency. Containing the exposure to external debt is important to manage the exchange rate risk.

According the bulletin, the government relied solely on medium to long-term domestic debt securities for the financing of federal fiscal deficit; stock of T-bills was reduced by around Rs 661 billion. The T-Bills/GDP ratio reduced from 10 percent (end June 2022) to 7 percent (end December 2022); government carried out gross issuance of around Rs 4 trillion of Pakistan Investment Bonds, out of which, 81 percent was through floating rate bonds. The total repayment against PIBs was Rs 1.7 trillion (including repayments against SBP Debt); government also issued Rs 364 billion of Ijara Sukuk instrument, predominantly with variable rate of return; the retail debt instruments i.e., National Saving Schemes (NSS) witnessed a net outflow of Rs 240 billion. In line with sound principals of fiscal discipline, no borrowing was carried out through State Bank of Pakistan. In July 2022, government repaid Rs 310 billion of SBP debt and the cumulative debt retirement against SBP debt stood at Rs 2 trillion from July 2019 to December 2022.

Within external debt, gross inflows were mainly recorded from multilateral sources; successful completion of the combined 7th and 8th review of the IMF Extended Fund Facility (EFF) led to the disbursement of US$ 1,166 million; government received US$ 1,500 million from Asian Development Bank under the ‘Building Resilience with Active Countercyclical Expenditures (BRACE)’ program; Asian Infrastructure Investment Bank (AIIB) co-financed the BRACE program to the tune of US$ 500 million, over and above the BRACE amount Saudi oil facility amounting to US$ 600 million was utilized (US$ 100 million each month); China SAFE deposit of US$ 1,000 million and Saudi Time deposit of US$ 3,000 million was successfully rolled over; and government repaid international commercial loans to the tune of US$ 3,722 million, out of which US$ 2,722 million were bank loans and US$ 1,000 million was international Sukuk maturity. Outstanding grantees extended to PSE stood at Rs 3,080 billion with Rs 1520 billion domestic and Rs 1560 billion foreign currency. Power sector Rs 2287 billion, Aviation Rs 245 billion financial Rs 66 billion, manufacturing Rs 46 billion oil and Gas Rs 40 billion and others Rs 396 billion.

Guarantees issued against commodity operations are not included in the stipulated limit of 2 percent of GDP as the loans are secured against the underlying commodity and are essentially self-liquidating. These guarantees are issued against the commodity financing operations undertaken by TCP, PASSCO, and provincial governments. The outstanding stock of commodity operations was PKR 1,139 billion at end December 2022.

External debt of US$ 86,565 million included $ 44, 679 million of multilaterals with $18, 192 million of World Bank, $15, 267 million of ADB, $7616 million IMF, $ 3,605 million others. Bilateral debt of $26,494 million included $8,459 million Paris Club and $18,035 million non-Paris club while commercial loans stood at $15, 392 million—ZAHEER ABBASI .