Pakistan’s debt pile soars to Rs22.5tr

Published: August 31, 2016
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Liabilities have risen to 75.9% of Gross Domestic Product.  PHOTO: REUTERS

Liabilities have risen to 75.9% of Gross Domestic Product. PHOTO: REUTERS

ISLAMABAD: Pakistan’s total debts and liabilities swelled to Rs22.5 trillion by last fiscal year end – a net increase of over Rs2.6 trillion within one year, according to the State Bank.

In terms of the total economy size, the country’s liabilities increased by another 3.7% of Gross Domestic Product (GDP) to 75.9% and crossed a dangerous mark, suggesting the country has fallen in a debt trap.

As against the Rs19.85-trillion level of the 2014-15 fiscal, Pakistan’s total liabilities increased to Rs22.5 trillion by June 30 of this year, showing 13.2% growth over the previous year, said the State Bank of Pakistan.

Pakistan’s way out of the debt crisis

The total debt includes the obligations of the government and the private sector, although the private sector debt is minimal compared with the government’s debt pile.

Excluding liabilities, the total debt grew to Rs21.5 trillion by last fiscal year-end – a whopping 72.5% of GDP and a net increase of Rs2.55 trillion from the previous financial year.

The external debt grew to Rs7.27 trillion at a faster pace than the domestic debt, although both components registered double-digit growth. This was an addition of Rs1.1 trillion in a single year on the back of 16.3% growth, according to the central bank.

The government claims its external debt is Rs5.4 trillion, although it raises serious questions about the government’s definition of debt calculation.

Pakistan’s external debt set to grow to whopping $90b

In terms of the US dollar, the total external debt and liabilities have increased to $73 billion – a net addition of $7.83 billion in a single year.

The increase in external debt is more than the International Monetary Fund (IMF) estimates that had put the figure at $71.87 billion in its last report.

The IMF had also estimated that the public debt would rise to 64.3% of GDP by the end of the 2015-2016 fiscal.

The government’s domestic debt also swelled to Rs13.62 trillion – higher by Rs1.43 trillion or 11.7% over the previous year’s level. The debt of public-sector enterprises grew at an alarming pace of 24% and was registered at Rs568 billion.

Pakistan has been borrowing heavily to meet budget needs, as it remains unable to broaden its extremely narrow tax base. The government, however, instead of improving its affairs got the definition of public debt changed from the IMF.

While the earlier statutory definition of debt was “a sum of total outstanding borrowings”, the new definition is “the debt of the government serviced out of the consolidated fund and debts owed to the IMF”.

Every Pakistani now owes over Rs101,338 in debt

Dr Asfhaque Hasan Khan, a former director of finance ministry’s general debt department, said the increase in debt was beyond anybody’s expectations. “I anticipated the total debt would grow to Rs20.5 trillion by the end of fiscal year 2015-16,” he said, adding that such an alarming rise suggested the government was borrowing secretly.

In its last report, the IMF said Pakistan’s fiscal deficit declined significantly although public debt remained high. For a developing country like Pakistan, 50% debt-to-GDP ratio is considered sustainable. Due to the alarming increase in debt, a major portion of the budget goes now towards debt servicing.

During the past three years, the PML-N government has been subject to severe criticism for acquiring expensive foreign debts and increasing the debt mountain.

Published in The Express Tribune, August 31st, 2016.

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Reader Comments (36)

  • Raw is War
    Aug 31, 2016 - 8:40AM

    which means, Pakistan’s Debt is equal to its Total GDP nominal. So the nation belongs to Creditors.Recommend

  • Amin
    Aug 31, 2016 - 9:00AM

    This is not a news. Given the amount of debts the government was taking right from the outset, it was obvious that it would fell into this debt-trap. For people who dont understand these figures and terms, 72% debt to GDP ration means that whatever the whole Pakistan is making or producing, 72% of it will go in debt servicing (returning). This is obnoxious. Shameless people still claim with sick smile on their faces that Pakistan is developing. Alas. But who will stop them.?? A country like Pakistan which has a solid agricultural and livestock base, we are in such a mammoth debt. Is it conceivable? It is merely mismanagement and corruption. God bless us..!Recommend

  • Independent
    Aug 31, 2016 - 9:09AM

    Its an eye opening report for PLMN fans and PTI bashers. None of this debt has been invested on human capital unlike other developing countries. We are loosing competitive advantage. Motorways and roads can not takes us out from these crisis.Recommend

  • optimist
    Aug 31, 2016 - 9:33AM

    This debt is peanuts. We will soon get $46 billion from our friend China. Also, China will give us $200 billions over nest 10 years. Our debt will be wiped out in no time.Recommend

  • Shaukat
    Aug 31, 2016 - 9:58AM

    Don’t worry. Nawaz hain naa.Recommend

  • Last Word
    Aug 31, 2016 - 10:00AM

    @optimist:
    Ha ha haRecommend

  • truthbetold
    Aug 31, 2016 - 10:04AM

    @Raw is War:

    “which means, Pakistan’s Debt is equal to its Total GDP nominal.”

    Actually, it is a lot worse. Pakistan’s reported GDP is a highly inflated artificial number. Musharraf and Shaukat Aziz cooked the books to inflate the GDP and make everything look rosy.Recommend

  • Wellwisher
    Aug 31, 2016 - 10:06AM

    Excluding liabilities, the total debt grew to Rs21.5 trillion by last fiscal year-end – a whopping 72.5% of GDP and a net increase of Rs2.55 trillion from the previous financial year.
    Dr Asfhaque Hasan Khan adds that such an alarming rise suggested the government was borrowing secretly.
    CPEC agreement is a secret.
    Spending of Establishment is secret and not available for Audit.
    What does all these things mean?
    Pakistan people have to wake up to the emerging realities.Recommend

  • truthbetold
    Aug 31, 2016 - 10:11AM

    @Amin

    ” It is merely mismanagement and corruption.”

    It is not a simple case of mismanagement and corruption. It is the price you pay for your obsession with Kashmir and geopolitical revisionist vision that forces you to maintain a large army that consumes a lion’s portion of the national wealth. Pakistan spends over 65% of its national income (over 12% of GDP) for the military- salary, pensions, perks, debt servicing for military purchases, nuclear weapons/missiles and military hardware.Recommend

  • Raju Indian
    Aug 31, 2016 - 10:19AM

    @Optimist – the CPEC money $46B or whatever it is, is also DEBT . The Chinese never give such grants to anyone. They themselves have very high levels of debt and cannot afford to give Pakistan anything other than loans. Sadly, the CPEC will further increase Pakistan’s debt in the short term, though long term revenues maybe helpful.Recommend

  • rajesh
    Aug 31, 2016 - 10:24AM

    How optimist your debt is 73 billion dollars and CPEC is 43 billion dollars project. Its not cash minting money it require time and by that time your debt will touch 100 billion dollars.Recommend

  • goiyakka
    Aug 31, 2016 - 10:36AM

    @optimist:
    boss anything china gives is also a loan…there is no free money coming from anywhere ! Recommend

  • Buzzkill
    Aug 31, 2016 - 10:56AM

    Waste some more time, resources & energy protesting against India and soon your debt will be more than your GDP.Recommend

  • vinsin
    Aug 31, 2016 - 11:47AM

    @Raju Indian:
    China do give Aid but for that you have to become part of Beijing consensus or in other terms a communist country which majority of Pakistani will not support that is why Pakistan still run to IMF for loans. Without USA and Gulf massive AID, Pakistan would be in much more difficult situation.Recommend

  • Manisha Patel
    Aug 31, 2016 - 12:17PM

    22.5 trillion divided by the population of Pakistan(191 million) = 1,15,183. That’s how much every Pakistani owes to the creditors. Recommend

  • jay
    Aug 31, 2016 - 12:41PM

    @optimist:
    You are so proud of ” hand outs ” its so shameful for a pure nation like Pakistan ! Recommend

  • Unknown
    Aug 31, 2016 - 12:46PM

    @Raju Indian:

    If you had shown even 10% of the interest in India what you Indian show on Pakistan, at least some of your population could get toilets Recommend

  • Tyggar
    Aug 31, 2016 - 1:07PM

    Since Pakistan doesn’t export much, it needs to keeps taking loans in Dollars to repay previous loans. This is precisely called a debt trap. The loans will keep mounting and so with the interest on those loans. Unless Pakistan finds some other way of generating foreign exchange, since the Dollar inflow from the US has now stopped, there is no way outRecommend

  • IBN E ASHFAQUE
    Aug 31, 2016 - 1:24PM

    The elite in Pakistan both political cum establishment will drown my country in debt and they will leave for London, Dubai or somewhere else when they have sunk us………May Allah guide us all.Recommend

  • mehboobBhai
    Aug 31, 2016 - 2:03PM

    “someone” should take away all properties and land over 1 acre per individual if they aren’t using it for production in any means.
    “someone” should take away all properties and land over 50 acre per individual if they are using it for production in any means.
    Give taken away land to those who don’t have any land so they produce their own food, like in Bhutan.

    “someone” ensure that tax is paid by those who earn more than 10lac per annum. and nobody can get their taxes waived off. those who have got it waived in past 20 years also pay that back to us.

    “someone” has to take immediate drastic steps to save us for morally and economically degrading society. Above steps or steps of similar nature have to be taken in order to get us back alive.Recommend

  • Waqas
    Aug 31, 2016 - 2:26PM

    We already have a bad history of using our debt in the worst possible way.

    CPEC is an investment in China’s perspective but for us its a loan. Out of $46 billion, $33 billion will be spent on power generation with return on equity upto 30% is guranteed!

    As soon as these projects start operating they’d sell power to GOP. How’s our govt going to pay for that? Obviously, by taking more loans. We’d be taking loans from the very same bank who is selling us power. Thats actualy funny. We are taking loans from one hand and paying way higher amount from the other hand.

    P.S $11 billion will be invested by GOP. And yes we’ll be financing it by loans at an interest rate of upto 12%. Ridiculous!Recommend

  • Haji Atiya
    Aug 31, 2016 - 2:32PM

    @IBN E ASHFAQUE:
    You forgot they will lease the entire country to China before they hop onto that midnight flight to Dubai, London or Palookaville…Recommend

  • Reddy
    Aug 31, 2016 - 2:45PM

    what’s so big deal,pakistan has one solution for all of it’s problems,CPEC…but,chinese companies don’t run on charity nor do chinese banks who lent money to it’s companies,venezuela too far away to witness for sadistic indians like me…now we can witness venezuela * 10 at our doorstepRecommend

  • ishrat salim
    Aug 31, 2016 - 2:46PM

    @Amin:
    Read carefully, it is 75.9% & not 72%. Both the civilian govt has bothered highest & PML N has crossed all limits. Almost all economists in Pakistan including Dr Pasha had forecasted this scenario for more than 5 years & Mr Dar had met them too to request them not forecast to avoid speculations, when they predicted that the amount will soar to S 90 billion by the end of 2018. When exports are down due to wrong policy of the govt making the exporters products un-competitive due to high cost of energy, gas, interest rate & non release of export rebate etc; FDIs is record low, import has increased, remittances is going down. They will soon run away, just wait. This will be the second time they will request for ” dollar bhego mulk bachao “. But this time expats will not send due to past experience & the present economic conditions in all over GCC & KSA. Recommend

  • ishrat salim
    Aug 31, 2016 - 3:27PM

    @truthbetold:

    It was the last govt of PML N that cooked the numbers for which Gen M govt had to pay penalty to IMF & WB. It is therefore, inconceivable to think that Gem & Shaukat Sb would have done similar number fudging in which only Dar Sb is an expert which has been exposed a number of times. Had Gen M & Shaukat Sb were involved in figure fudging it would not have remained hidden & the MOU that was signed by the PPP govt in 2008 with IMF, read the its first page. The MOU was signed on explicit understanding that the PPP govt shall pursue the steps taken by Gen & Shaukat Sb govt, read….give the devil its due.Recommend

  • Amin
    Aug 31, 2016 - 3:34PM

    @truthbetold:
    Agreed that pakistan spends 18% of its budget on its armed forces. But given the wildness of the world we live in, perhaps if someone is not very naive of history, its peanuts. We need to expend even more. As far as Kashmir is concerned, its not a matter of obsession. Its a matter of human rights and international laws, which India is brutely abusing. And having these things in mind, we are clear that this debt is mismanagement and corruption…! Nothing else.Recommend

  • Parvez
    Aug 31, 2016 - 3:59PM

    Its worth reading ‘ The Confessions of an Economic hit-man ‘ by Jon Perkin….it not fiction.
    He describes how countries like Pakistan are systematically and with full intent of those outside and inside, brought into this position…..it is one of best ways to cripple a country.Recommend

  • سے Shaam (Hanafi)
    Aug 31, 2016 - 5:12PM

    Pakistan should try to make China fool for money, like they minted dollars after dollars from gullible USA. Alas, if that is so easy, Chinese are shrewd, they will suck the last drop of blood and sell the dead body for trash.Recommend

  • Mayor
    Aug 31, 2016 - 5:28PM

    @Unknown Just so you know by 2017 many states in India will be open defecation free. Infact they are going to announce 10 towns which will be free of open defecation in coming weeks. We do care about our problems. That is why they are being solved however it maybe slow. Recommend

  • ajeet
    Aug 31, 2016 - 6:06PM

    Time to eat grass?Recommend

  • Komal S
    Aug 31, 2016 - 7:56PM

    @Unknown: says “If you had shown even 10% of the interest in India what you Indian show on Pakistan, at least some of your population could get toilets”

    Good One ;=)Recommend

  • Kulbhushan Yadav
    Aug 31, 2016 - 8:21PM

    @Unknown:
    if you had shown even 1 % of interest in Pakistan to that you show in India toilets, Pakistan would not have been a shitty place like it is now.Recommend

  • Salim Khan
    Sep 1, 2016 - 9:13AM

    If you know the Chinese and deal with them, you will know that they do not lend even a cent unless they are assured of getting back 10 times more. With this debt and additional debt of $46 billion at an interest of 18% and assured returns of 39% on their investment, Pakistan will sink in the debts. The CPEC even of materializes will be either destroyed by US and India or will make it so heavily costly to maintain due to its security needs that it will soon become a white elephant with a burden of heavy debt. Every Pakistani must act now!Recommend

  • whitesky
    Sep 4, 2016 - 12:28PM

    @optimist: ;Even If China gives 200 billion dollar it will also be a debt or you expect them to donate this money.: Recommend

  • Sayeed
    Sep 9, 2016 - 2:54PM

    @Waqas:

    The GOP was not showing what’s the real Interest rate of #CPEC. They are making to average Pakistani citizen to believe that $46Billion is FDI & not interest. #CPEC was carried out by Chinese companies with Chinese workers & its not an #Makeinpakistan like #makeinIndia. we might easily cross $100Billion b4 2020Recommend

  • Np
    Sep 13, 2016 - 7:00AM

    @optimist:
    The $46 billion from China will actually add to the debt since it is a loan not a grant or FDIRecommend

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