Domestic Bonds

Pakistan’s public debt rises by Rs17.79tr under current government

April 02, 2022 (MLN): Pakistan’s total public debt has continued to snowball as it rose by Rs 17.79 trillion under the current government to stand at Rs 42.75 tr through December 2021 from Rs 24.95 tr Rs at the end of the 2018 financial year.

The country’s total public debt fell from Rs 5.28 tr in December 2021 to Rs 37.46 tr at the end of December 2020, mainly due to the federal primary deficit, interest payments and exchange rate fluctuations. The federal primary deficit of Rs 400 billion, interest payments of Rs 1.45 trillion, shrinking government cash balances worth Rs 477 billion while the depreciation of the PKR against the USD contributed 1.51 tr to the increase in the total public debt burden from July to December 2021, the Public Debt Bulletin issued by the Ministry of Finance July-December 2021 disclosed.

The Fiscal Responsibility and Debt Limitation Act of 2005 (FRDL) defines “total public debt” as debt owed by government (including federal and provincial governments) repaid from consolidated funds and debts owed to the International Monetary Fund.

Of the total public debt, Rs26.75tr or 63% was borrowed domestically, while the remaining Rs 16tr or 37% came from foreign creditors.

Total government debt in US dollars stood at $242 billion as of December 2021, using an exchange rate of 176.5 rupees to the US dollar.

Within the domestic debt, the government relied on long-term domestic debt securities to finance its budget deficit and the repayment of domestic maturities.

Composition of domestic debt in terms of creditors, the report indicates that the federal government owes 13.26 rupees to commercial banks, or 50% of the domestic debt obtained through government securities. While the government owed 23% of domestic debt to the State Bank of Pakistan (SBP).

While the government has withdrawn/redeemed the portion of treasury bills amounting to Rs1tr, resulting in the reduction of short-term maturities in line with the government’s commitment to reduce its gross financing needs. Additionally, the government has repaid 569 billion rupees on the SBP debt. Cumulative debt repayment to SBP amounted to Rs 1.7 tr from July 2019 to December 2021;

External debt

External debt was recorded at $90.6 billion at the end of December 2021.

Pakistan’s external debt comes from four main sources, with around 47% coming from multilateral loans, 31% from bilateral loans, 11% from commercial loans and 9% from Eurobonds/sukuk at the end of December 2021.

Although borrowing from commercial sources has increased relatively in recent years, multilateral and bilateral sources still cumulatively constitute 78 percent of the external public debt portfolio as of end-December 2021, the finance ministry said.

Of the total foreign obligations, borrowings from multilateral sources amounted to $42.4 billion, while loans from the country’s bilateral development partners reached $28.08 billion, including loans from the Club. of Paris worth 10.15 billion dollars.

Commercial loans, which stood at $9.01 billion a year ago, jumped to $10.22 billion, or 11% of external public debt.

Furthermore, Pakistan has re-entered the international capital markets and managed to raise $1 billion in July 2021 through the issuance in several tranches of 5, 10 and 30 year Eurobonds. These bonds were issued at a premium, the report revealed.

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Published on: 2022-04-02T15:21:09+05:00