Pakistan’s total debt and liabilities jumped to Rs53.5 trillion – an addition of Rs23.7 trillion under the watch of former prime minister Imran Khan, who failed to meet his promise of bringing down by half the debt pile left behind his arch-rival – the PML-N.
The increase in public debt alone, which is the direct responsibility of the government, was Rs19.5 trillion, as it swelled to Rs44.4 trillion by March 2022, according to the central bank.
The State Bank of Pakistan’s (SBP) latest debt bulletin for the end of March 2022 showed that the debt burden increased both in absolute terms and in terms of the size of national economy, underscoring that Pakistan’s economic viability requires serious long-term reforms.
The debt issue has been politicised for the past 10 years and no government brought meaningful reforms to stop the debt accumulation.
The total debt and liabilities of the country increased to Rs53.5 trillion, a surge of Rs23.7 trillion or nearly 80%, when compared with the statistics before the Pakistan Tehreek-e-Insaf (PTI) came to power.
Imran Khan won the July 2018 elections and promised to curtail the debt burden while also blaming his predecessors for throwing the country under the debt pile.
Imran Khan also formed the Debt Commission to probe the reasons for the surge in public debt from Rs6 trillion in 2008 to Rs24.5 trillion in 2018, suspecting that the debt increased due to alleged corruption by his political opponents – former president Asif Ali Zardari and former prime minister Nawaz Sharif.
But the PTI government never made the Debt Commission report public.
In terms of size of the economy, Pakistan’s total debt and liabilities were equal to 76.4% in 2018 that jumped to 80% by March this year despite the rebasing of the economy.
The SBP report showed that the last PTI government added Rs19.5 trillion to the public debt during its three-and-a-half-year stint, which was more than the liabilities accumulated by any government in 75 years.
The gross public debt stood at Rs44.4 trillion by the end of March 2022, according to the SBP data.
During their previous five-year stints in power, the PML-N added around Rs10 trillion and the PPP Rs8 trillion to the debt burden. But Imran Khan’s party left behind his opponents in just 43 months.
The lower-than-targeted tax collection, steep currency devaluation of around 50%, higher interest rates, higher expenditures along with losses incurred by state-owned companies and debt mismanagement were the main reasons for the surge in public debt during the PTI’s tenure.
Debt breakdown
The federal government’s total domestic debt increased to Rs28 trillion, an addition of Rs11.6 trillion (or 71%) in the last three and a half years. Before Imran Khan took office in 2018, the domestic debt stood at Rs16.4 trillion.
The external debt of the federal government increased at an alarming pace of 91% to nearly Rs15 trillion since July 2018. There was a net increase of Rs7.1 trillion in the external debt, largely due to currency depreciation and building foreign currency reserves through borrowing.
At the end of August 2018, the external debt stood at Rs7.8 trillion.
By March 2022, the rupee-dollar parity was at Rs183.5 to a dollar. In August 2018, the value of the dollar was equal to Rs124.2, showing a massive depreciation of nearly Rs59 or 48%.
By the end of first week of April 2022, when the PTI left office, the rupee dropped to Rs187 to a dollar.
The rupee crossed the 200 mark on Thursday – for the first time ever, which would further deteriorate the external debt situation as the country would need more rupees to service the same amount of debt.
The direct consequence of the mounting debt pile is a huge increase in the cost of debt servicing. The debt servicing, which three and a half years ago was Rs1.5 trillion, is expected to stay above Rs3.2 trillion by the end of current fiscal year.
The IMF debt stood at Rs740 billion before the PTI came to power and it surged to Rs1.4 trillion by the end of March this year.
The new government is in negotiations with the IMF to revive the stalled programme and also increase its size to $8 billion, which means additional borrowing of $5 billion from the IMF, from now till June next year.
The private sector’s external debt, which was Rs1.6 trillion around three and a half years ago, has jumped to Rs3.1 trillion.
The PTI government also failed to bring any reforms to the loss-making state-owned enterprises, resulting in a jump in their obligations coupled with the impact of currency devaluation.
The PSEs’ debt, which was Rs1.4 trillion in June 2018, doubled to Rs2.8 trillion by March, according to the SBP.
The PSEs’ external debt increased 312% to Rs1.34 trillion, suggesting a major impact of the currency devaluation. The domestic debt of the PSEs increased from Rs1.1 trillion to over Rs1.4 trillion, an addition of 35%.
Published in The Express Tribune, May 21st, 2022.
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