Pakistan’s debt pile soars to Rs22.5tr

Liabilities have risen to 75.9% of Gross Domestic Product

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.



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.



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”.



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 31^st, 2016.