Debt load rises to a record Rs81.2 trillion
Pakistan’s debt and liabilities reached a height of Rs81.2 trillion, growing at a rate of more than 27% in the last year. This presents the newly elected administration with emergent management issues.
According to a bulletin issued by the State Bank of Pakistan (SBP) on Monday, as of the end of December, the nation’s overall debt and liabilities had climbed by an additional Rs17.4 trillion over the previous year.
With Rs4.6 trillion in liabilities, the overall debt and liabilities as of right moment are Rs81.2 trillion. Since December 2022, the government has accrued debt at a pace of 27.2%, or Rs. 48 billion every day on average. With five months of the caretaker government included, this is one of the largest monthly rises in the public debt.
One of the most important tasks facing the recently elected government will be managing the public debt and the rising expense of interest payments, which may necessitate making difficult choices. But such decisions might be difficult for a coalition administration that is clearly weak, especially if possible coalition partners have different ideologies.
The most recent Fiscal Policy Statement 2024 from the Ministry of Finance also revealed a notable increase in the national debt load in the fiscal year 2022–2023—the year the Pakistan Democratic Movement took power in Pakistan.
By the conclusion of the preceding fiscal year, the average citizen’s debt load had increased by 25.2% to Rs271,624. The statement said that, on average, each person’s debt load rose by Rs54,500 in just a single year.
According to the SBP debt bulletin, during the first half of this fiscal year, the nation paid Rs4.4 trillion in interest payments alone. This is Rs1.7 trillion, or two-thirds more, than during the same period in the previous fiscal year.
Until the central bank lowers the key policy rate and the government bargains with commercial banks for a reduction, the cost of servicing the debt cannot be reduced.
Except for staking a wager on a decline in interest rates to lower the annual cost of debt, the party manifestos of the PPP and the PML-N, however, provide no remedies to the mounting debt load. However, any such decrease would be outweighed by the additional debt the government must take on in order to survive.
Based on SBP figures, the gross public debt by the end of December was Rs67.3 trillion, directly within the purview of the finance minister. The gross public debt also rose in a single year by Rs 14.5 trillion, or 27.4%.
The preceding fiscal year’s record-breaking Rs6.7 trillion federal budget deficit was a result of the PDM government’s expansionary and politically driven budgetary policies. The impact of currency devaluation was demonstrated by the rise in state debt, which outpaced the budget deficit.
The PML-N added almost Rs10 trillion, the PPP added about Rs8 trillion, and the PTI alone contributed more about Rs19 trillion in public debt during their separate five-year administrations.
Until major reforms—such as reviewing provincial projects, closing ministries that operate in areas now under provincial jurisdiction, and managing debt expenses—are started, the burden will remain.
The primary causes of the public debt explosion continue to be lower-than-expected revenue collection, sharp currency devaluation, higher interest rates, more spending, losses by state-owned businesses, and poor debt management. By the end of December, the debt and liabilities of public sector enterprises had increased by one-fifth to Rs3.9 trillion, reflecting these businesses‘ uncontrollably large losses. State-owned firms have not undergone any reform by any government.
The boards of these SOEs are populated by political appointees; among them is Dr. Shamshad Akhtar, the interim finance minister, who also serves on the boards of the Pakistan Stock Exchange and Sui Southern Gas Company Limited. The unidentified sums of board fees given to the finance ministry officials seated on 60 of these boards have prompted the Auditor General of Pakistan to file an audit objection.
The average exchange rate at the end of December was Rs281.9, down 264.4%, according to the SBP data, which had a big effect on the government’s external debt. In less than a year, the external debt climbed by 26% to Rs33.6 trillion, with a net rise of Rs7 trillion. This growth was mostly brought on by currency depreciation and the creation of foreign currency reserves through borrowing.
According to the SBP, the nation’s IMF debt increased by 30% by the end of December, reaching Rs2.14 trillion.
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