Now equals 42% of GDP, SBP data shows. CREATIVE COMMONS
After increasing by a whopping 22.9% in just one year, domestic debt of the central government reached Rs10.8 trillion at the end of March, data released by the State Bank of Pakistan (SBP) shows.
Domestic debt now equals 42% of gross domestic product (GDP) after increasing by as much as Rs2 trillion since March 2013 when it totalled Rs8.8 trillion, or 38% of GDP.
Interestingly, data shows the bulk of the increase in domestic debt (Rs1.74 trillion) has taken place since the new government came into power in June 2013.
“The sharp build-up in debt is to finance the large fiscal deficit of the government. Data indicates that the fiscal deficit is likely to remain higher than the target,” a commercial banker told The Express Tribune while requesting anonymity.
“The pace of increase in domestic debt is alarming. In the first nine months of the current fiscal year, it increased by 20% year-on-year versus a 17% rise in the same period of the last fiscal year,” he said.
Total central government debt, including external debt, stood at Rs15.3 trillion at the end of March, up 15.2% from a year ago. External debt of the central government – which excludes IMF loans for balance of payment support – stood at Rs4.4 trillion at the end of March, registering little change over the preceding one year.
Under the Fiscal Responsibility and Debt Limitation Act 2005, the government was required to bring public debt under 60% of GDP by June 2013, and further reduce it by 2.5% of GDP every year afterwards. However, SBP data until December 2013 shows the debt-to-GDP ratio stands at 63.3% of GDP.
Central government’s domestic debt can be divided into long and short terms. The short-term debt component stood at Rs5.4 trillion, up 13.7% on a year-on-year basis. While government’s borrowing through market treasury bills (MTBs) declined 18.2% during the year-long period, the overall bump in the short-term debt was due to “MTBs for replenishment of cash.”
Instruments created to enable government borrowing from the SBP, MTBs for replenishment of cash accounted for more than half of the central government’s total short-term domestic debt. They amounted to Rs2.7 trillion at the end of March, up 51.8% year-on-year.
Central government long-term domestic debt – which is divided into permanent debt, unfunded debt and foreign currency loans – increased 33.8% to Rs5.3 trillion during the period under review. The amount of foreign currency loans remained flat at the negligible level of Rs4.5 billion.
However, the amount under the unfunded debt category witnessed an uptick of 9.5% mainly on the back of money borrowed through savings schemes (Rs2.1 trillion).
The largest share in the overall increase in domestic debt was recorded in the permanent debt category, which includes loans with maturities of over two years. For example, the size of debt under the Pakistan Investment Bonds (PIBs) ballooned to Rs2.3 trillion at the end of March. This is 111.4% higher than the corresponding period at the end of the third month of 2013.
Admittedly, the positive aspect of the change in the borrowing pattern is a reduction in the rollover risk faced by the government. However, it also burdens government finances with long-term debt-servicing costs, the commercial banker noted.
“Significant fiscal reforms are required to contain the fiscal deficit and reduce government borrowings,” he said.
Published in The Express Tribune, April 30th, 2014.
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The figures presented is just to boggle the minds of the common man. Plainly speaking we want to know the following. a. Internal Debt as it stood on the day this Govt took over b. External Debt in Dollars as it stood the day this Govt took over. c. Internal Borrowing by the Govt since it took over d. External Borrowing in Dollars including IMF, World Bank etc. since it took over e. Total Internal Debt in Rupees & External Debt in Dollars as it stood on 30th Mar 2014. Is it too much to ask the SBP. Don't we have a right to information.
Government borrowing to finance its budget deficit is the cruelest form of indirect taxation on the poor as it results in inflation (price increase) as almost entire earning of the poor is spent on basic necessities.
Shame on this government. We are proving worse than those before.
According to Warren Buffet, Debt-to-GDP ratio is an indicator of the direction a stock market will take during the course of the financial year. U.S.A Debt-to-GDP reached 180% this past session while South-Asian markets are at around 20%. As an absolute measure, both debt and GDP are useless but when viewed together, they provide an accurate gauge for potential development and investment
Since we can't collect taxes, this is going to be our fate. Dar has basically found every single bank out there for loans with no guarantees for repayment. Maybe another Saudi gift will save us.
The country seems to be lurching from one financial crisis to another. Where is all the money going ? There is still an ongoing power crisis which impacts overall economy by reducing industrial output. This in turn impacts tax revenues which are used to pay down the debt. How will this ever be paid off ? It seems that both PPP and PML(N) governments are clueless about how to run the country. Reducing budget deficit or a balanced budget is obviously not in their lexicon. More begging and baksheesh from friendly richer nations for the miskeen Pakistanis. And they oblige so they can a) get us to do their dirty work and b) come in and kill the bustards.