Debt mark-up to swallow Rs3.9 trillion

The mark-up on domestic and foreign debt will eat up Rs3.9 trillion out of the total current expenditure of Rs8.69 trillion in next fiscal year 2022-23. Pakistan’s interest payments on foreign and domestic debt will further increase due to the increase in loans.

The federal government has projected that it will spend Rs3.95 trillion on payment of mark-up on the domestic and foreign debt in the upcoming fiscal year. For the ongoing year, it had allocated Rs3.059 trillion for mark-up payments on the domestic and foreign debt. However, actual payments rose to Rs3.143 trillion in the current year, according to the revised estimates.

Of the Rs3.95 trillion earmarked for interest payments in FY23, Rs3.43 trillion will be the mark-up on domestic debt and Rs510.97 billion will be the mark-up on foreign debt. Economists believe that pressure will mount on the foreign currency reserves of the country with the huge debt servicing cost.

Economic assistance

According to the budget documents, the external loans for fiscal year 2022-23 have been projected at Rs3.12 trillion. The government has projected Rs269.2 billion in project loans and Rs722.3 billion in programme loans. It had anticipated an inflow of Rs2.69 trillion in external loans in the outgoing financial year, but according to the revised estimates, the inflow will rise to Rs2.96 trillion.

The government had projected project loans of Rs259.94 billion, however, now it hopes to receive Rs245.01 billion during the ongoing financial year. It had projected programme loans of Rs438.19 billion, but now it expects to receive Rs1.25 trillion in the ongoing financial year. The government had projected Rs496 billion in IMF loans for budgetary support in financial year 2021-22, however, it has not received anything so far and there is no projection for the next fiscal year.

Pakistan had not projected to receive any amount from Saudi Arabia on account of deferred oil payment facility in the ongoing financial year. However, it now expects to get Rs70 billion under the facility in the ongoing year and Rs148.8 billion in the next year. From the Islamic Development Bank, the government had estimated receipts of Rs160 billion in the outgoing year, against which it received Rs232.2 billion. It expects to get Rs223.2 billion during the next financial year.

In the next year, Rs372 billion is expected to be raised through the issuance of Sukuk (Islamic bonds) and Eurobond. The government had expected to generate Rs560 billion through the issuance of Sukuk but it received Rs342.5 billion this year, according to the revised budget estimates. The government had expected to generate Rs779.2 billion from commercial banks in the ongoing financial year but it received Rs821.9 billion, according to the revised estimates.

It projects the receipt of Rs1.389 trillion in the next financial year. It is anticipated that Rs3.15 trillion will be received through external resources, including grants of Rs25.5 billion, in FY23. The government had projected receipts of Rs2.72 trillion through external resources in FY22 but it revised the estimate upwards to Rs2.99 trillion.