KARACHI: The federal government’s domestic debt increased by 24 per cent year-on-year at the end of November 2023, reflecting the increasing load of debt servicing.

The latest data issued by the State Bank of Pakistan (SBP) on Friday showed that the federal government’s domestic debt rose to Rs40.955 trillion at the end of November 2023 compared to Rs32.985tr in November 2022, an increase of Rs7.985tr or 24pc.

In the first five months of the current fiscal year, the domestic debt swelled by Rs2.146tr from Rs38.809tr on June 30, 2023. On a month-on-month basis, the increase was just 1pc.

The volume of domestic debt has increased at a much faster speed. The country is already under pressure of foreign debt servicing which resulted in economic contraction in FY23.

On domestic debt servicing, the government will spend Rs6.43tr in FY24 against Rs3.439tr in FY23, which was later revised to Rs5.52tr.

Overall debt rose Rs63.3tr at the end of November

The increasing debt servicing has left no space for development spending. This situation compels the government to borrow more because revenue collection doesn’t match the spending requirements. The economic growth in FY23 was negative, thus the revenue growth remained below the needs of the government.

In the budget of FY24, the government allocated Rs7.302tr for debt servicing, including interest payments and retiring the principal as and when due during 2023-24, which is 50.5pc of the total budget outlay of Rs14.46tr.

The allocation of Rs7.3tr for debt servicing in FY24 was much higher than the amount spent in FY23.

The caretaker finance minister has recently announced having collected revenues more than the target during the first half of the current fiscal year, but it will not help the country come out of the debt trap.

The government borrowed the highest amount of Pakistan Investment Bonds (PIBs) which increased by Rs5.514tr to Rs24.976tr year-on-year at the end of November 2023. However, the borrowing through treasury bills noted an increase of Rs751bn during the same period as the total reached Rs7.513tr.

The external debt in terms of PKR increased by 24.8pc or Rs4.461tr as it reached Rs22.434tr by the end of November 2023.

The external debt during this period was vastly affected by the exchange rate as most of the time the PKR devalued against the US dollar which increased the amount in dollar terms.

In the budget of FY24, the government allocated Rs872.2bn for external debt servicing against the revised debt servicing of Rs725.4tr in FY23.

The total federal government debt (domestic plus external) reached Rs63.389tr at the end of November 2023 compared to Rs50.959tr in November 2022, an increase of Rs12.43tr or 24.4pc.

Published in Dawn, January 6th, 2024