KARACHI; The domestic debt of the central government increased by Rs6 trillion in the first 11 months of the outgoing FY23.
Data issued on Wednesday by the State Bank of Pakistan (SBP) revealed that the PMLN-led government heavily relied upon borrowing to bridge the gap between its high spending and low revenues.
According to the SBP data, the domestic debt of the central government rose to Rs37.054tr in May from Rs31.085tr, showing an increase of 19.2 per cent or Rs5.969tr.
An unprecedented increase in debt servicing due to extensive borrowings has created serious imbalances in the budget for FY24. The government will spend around Rs7.302tr on debt servicing, more than half of the total budget outlay of Rs14.460tr for the current fiscal year.
In the outgoing fiscal year, the government allocated Rs3.95tr, which was later revised to Rs5.520tr.
Further details showed that the government borrowed half a trillion (Rs505bn) alone in May. It is believed in the financial circle that June’s figure (not released yet) would be much higher due to the settlement requirement being the closing month of the fiscal year.
The SBP data showed that the external debt of the central government increased by 30.8pc during the 11 months of FY23. In terms of rupees, the external debt increased by Rs5.161tr to Rs21.908tr during the 11 months.
During the current fiscal year, the foreign debt servicing will be more than FY23. According to the budget document, the country will spend Rs872.219bn against Rs510.972bn budgeted for FY23. It was later revised upward to Rs725.3bn.
The central government’s total debt increased by Rs11.13tr or 23.3pc to Rs58.962tr during the 11 months of FY23. The highest amount of Rs4.592tr was borrowed through the auction of Pakistan Investment Bonds (PIBs). The stock of PIBs reached Rs22.279tr till May.
The heavy borrowing through the PIBs showed that banks had been parking their money in risk-free high-yielding government papers as a result advances to the private sector plunged in the outgoing fiscal year. This is a sign of a slowdown in economic activities.
The government expects the economy will grow by 0.29pc, but many independent economists forecast a contraction in FY23.
Published in Dawn, July 6th, 2023
