ISLAMABAD, Feb 2: Pakistan’s public debt is expected to go up by over Rs2 trillion by the end of 2008-09, the highest ever increase in a single year.

The public debt is estimated to rise by 34 per cent to Rs7,931 billion by June 30 from Rs5,901 billion in 2007-08 because of massive depreciation in the value of the rupee and external loans obtained for budgeting the balance of payments.

According to figures compiled by the ministry of finance, the foreign currency debt will reach Rs4,811 billion and domestic currency debt will stand at Rs3,120 billion by the end of June 2009.

The public debt share as percentage of the GDP will rise to 59 per cent from 56.3 per cent in the last financial year. It will be a violation of the Fiscal Responsibility and Debt Limitation Act, 2005, which asks for a gradual reduction in public debt.

Talking to Dawn, Adviser to the Prime Minister on Finance Shaukat Tarin confirmed that the public debt would go up mainly because of deficit financing, which stood at around Rs500 billion. He, however, said it would start declining as percentage of the GDP from the next year.

He said Pakistan would receive $8.5 billion to $9 billion by June 2009. After repayment, the net external loan was expected to remain at $7 billion by the end of the current fiscal year, he added.

The external debt is estimated to reach $51.315 billion in 2008-09 from $44.467 billion in the last financial year. It is projected to edge up to $56.820 billion in 2009-10, $59.628 billion in 2010-11, $61.799 billion in 2011-12 and $62.303 billion in 2012-13.

The total public debt amounted to Rs6,572 billion at the end of the first quarter (July-Sept) of the current fiscal year, showing a massive increase of Rs671 billion in just three months.

The rupee depreciation in the first quarter had an impact of Rs447 billion on the stock of public debt. The significance of this effect is highlighted by the fact that even though the stock of foreign currency debt has gone down in dollar terms by $400 million in the first quarter, there has been an increase in rupee terms of Rs414 billion or 62 per cent.

According to a report on debt policy 2008-09 submitted to the National Assembly, the rupee depreciation has been responsible for approximately 66 per cent increase in public debt.