Debt servicing balloons by 11pc in July-Nov

Published January 28, 2018
The stock of domestic debt as a percentage of GDP was 46.6pc at the end of 2016-17 as opposed to 46.8pc a year ago. Total debt stocks rose to Rs15.76tr at the end of November 2017.
The stock of domestic debt as a percentage of GDP was 46.6pc at the end of 2016-17 as opposed to 46.8pc a year ago. Total debt stocks rose to Rs15.76tr at the end of November 2017.

KARACHI: The government paid Rs598 billion in domestic debt servicing in July-November 2017, registering a year-on-year growth of 11 per cent, according to the Monetary Policy Information Compendium that the State Bank of Pakistan (SBP) issued on Jan 26.

Growing debt servicing is a sign of increasing debt stocks as the government relies heavily on borrowing for budgetary support and development expenditure.

In the latest monetary policy statement, the SBP said the fiscal deficit for July-December is expected to be around the last year’s level of 2.5pc, indicating the gap would be within the target.

However, the increase in debt servicing can widen the fiscal deficit. Five-month debt servicing is about 60pc of development expenditures whose target for 2017-18 is a little over Rs1 trillion.

The report said debt servicing was 30.4pc of tax revenue in the last fiscal year.

It said domestic debt increased by Rs917bn in July-November compared to Rs652bn in the same period of the preceding fiscal year. Total debt stocks rose to Rs15.76tr at the end of November.

The Federal Board of Revenue collected Rs1.3tr in taxes in July-November, up 20pc from a year ago.

Funds for domestic debt servicing are raised through borrowing from banks and the central bank. This further increases the burden of debt servicing each year.

In 2016-17, the government had to pay Rs1.2tr in domestic debt servicing, which was more than development as well as defence expenditures.

The government usually slashes development expenditures to keep the fiscal deficit within the target while debt servicing takes away the largest share from revenues.

The five-month trend suggests that debt servicing for 2017-18 will be around Rs1.4tr, which is large enough to make the government miss its annual fiscal deficit target.

Published in Dawn, January 28th, 2018

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Banning PTI
Updated 16 Jul, 2024

Banning PTI

It appears that the govt and its backers within the establishment have still not realised that they are in uncharted territory.
Nato at 75
16 Jul, 2024

Nato at 75

EMERGING from the ashes of World War II, and locked in confrontation with the Soviet-led Communist bloc for over ...
Non-stop massacres
16 Jul, 2024

Non-stop massacres

Netanyahu is cunningly pretending to talk peace while mercilessly pounding Gaza. What is clear is that a return to pre-Oct 7 status quo is impossible.
Afghan challenge
Updated 15 Jul, 2024

Afghan challenge

Foreign states must emphasise to the Afghan Taliban diplomatic recognition and trade relations all depend on greater counterterrorism efforts.
‘Complete’ justice
15 Jul, 2024

‘Complete’ justice

NOW that the matter of PTI’s reserved seats stands resolved, there are several equally pressing issues pertaining...
Drug fog
15 Jul, 2024

Drug fog

THE country has an old drug problem. While the menace has raged across divides of class and gender, successive ...