KARACHI: Pakistan’s total debt and liabilities surged by 29 per cent, or Rs17.332 trillion in FY23 to reach Rs77.104tr during FY23, compared to Rs59.772tr in FY22, according to the State Bank of Pakistan’s latest data released on Wednesday.

However, the gross external debt of the country declined by $6 billion during the same fiscal year, reaching $124.3bn compared to $130.3bn in FY22.

The SBP reported that as a percentage of GDP, total debt and liabilities reached 91.1 per cent, up from 89.7pc in FY22.

Excluding liabilities, the total debt of the country in FY23 stood at $72.991tr, compared to Rs56.837tr in FY22.

This represents a growth of 28.4pc, compared to 24.7pc in the preceding fiscal year FY22. As a percentage of GDP, the debt was 86.2pc, compared to 85.3pc in the previous fiscal year.

The data indicates that domestic debt rose to Rs38.8tr in FY23, up from Rs31.085tr in the previous fiscal year.

The impact of this substantial debt and liabilities on the economy is evident from the debt servicing, which reached Rs9.819tr in FY23, compared to Rs5.578tr in FY22. This reflects a year-on-year growth of 76pc and a percentage of GDP at 11.6pc, compared to 8.4pc in FY22.

The data reveals that interest payments on debt amounted to Rs5.935tr, compared to Rs3.331tr in the previous fiscal year. The size of GDP in FY23 significantly increased to Rs84.657tr, compared to Rs66.623tr in FY22.

While the size of external debt decreased during the year FY23, the external debt servicing increased by almost 25pc.

However, the debt servicing increased by $5.7bn to $20.8bn in FY23 from $15.1bn in the preceding year. Due to a high degree of political and economic uncertainties in FY23, the government faced challenges in borrowing from commercial banks and other sources. By the end of FY23, the government struggled to secure an IMF loan, resulting in a Standby Arrangement of $3bn for nine months. This arrangement facilitated inflows from Saudi Arabia and the United Arab Emirates and enabled the rollover of some Chinese loans.

The detail shows that Pakistan paid $16.39bn as a principal amount and $4.420bn in interest on external debts.

In FY24, the country is projected to spend around Rs7.3tr on debt servicing, including both interest and principal amounts. This constitutes 50.5pc of the total budget outlay of Rs14.46tr.

The significant debt servicing leaves little room for the government to allocate funds towards development projects and other expenditures. The government’s main recourse is to borrow from both domestic and foreign sources.

Published in Dawn, August 17th, 2023