KARACHI: The government’s domestic debt and liabilities increased by 12 per cent to Rs26.755 trillion during the 11 months of the current fiscal year (11MFY21) compared to Rs23.876tr in June 2020.

The government borrowed Rs2.88tr during 11MFY21, with most of the amount accumulated through the Pakistan Investment Bonds and market treasury bills (T-bills). The PIBs attracted $263 million also as foreign investment during FY21. The government borrowed Rs1.437tr through the auction of PIBs in 11MFY21 which enhanced total amount to Rs14.323tr till May FY21. The amount of PIBs in June 2020 was Rs12.886tr.

Similarly, the government raised a large amount through the T-bills but still it was less than the PIBs. The PIBs offer much better returns (for instance 10 per cent return on benchmark 10-year PIBs). Since the interest rate remained unchanged for almost a year, investors preferred to invest in short-term T-bills. Despite this advantage of short-term, huge investment has piled up with the PIBs which reached Rs14.43tr. The largest amount of long-term PIBs was raised during the previous government which built up domestic debts but saved the government from immediate repayments; creating space for the present government to borrow more.

The government raised Rs1.084tr during 11MFY21 as it increased to Rs6.658tr in May FY21 from Rs5.575tr in June 2020.

The participation of liabilities in overall domestic debt and liabilities is not significant while the liableness of the government increased by just Rs97bn to reach Rs689.5bn till May FY21.

The government succeeded in keeping the fiscal deficit within range in FY21 despite providing huge amount to support the poor drastically affected by the Covid-19 pandemic. The government also succeeded in achieving unexpectedly higher growth rate of 3.9pc during FY21 which encouraged it to allocate higher amount for Public Sector Development Programme for FY22.

Published in Dawn, July 6th, 2021