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Wednesday Apr 08 2020
Web Desk

Public debt up 5.14% to Rs33.421trln in July-Feb FY20

Web Desk
Photo: file

KARACHI: Pakistan’s public debt rose by 5.14% to Rs1.635 trillion in the eight months of the current fiscal year, mainly due to increase in domestic debt accumulation, according to the data released by State Bank of Pakistan.

Public debt was Rs33.421 trillion at the end of February 2020, up from Rs31.786 trillion till end June 2019. Domestic debt increased 7.02% to Rs22.188 trillion at the end of February, while foreign debt rose slightly, up 1.60% to Rs11.232 trillion.

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The growth in Pakistan’s overall debt stock remains up-driven primarily  due to the government’s weak fiscal position, a shortfall in tax revenue, higher interest payments incurred due to monetary tightening, and a rise in expenditures, a report published in The News stated.

Moreover, the increase in domestic debt in the period under review stemmed from long-term debt. The government relied heavily on the commercial banks’ expensive borrowing to meet its revenue-expenditure gap, the publication reported.

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Analysts said the government, along with higher expenditures, is also likely to take a significant hit on its revenues because of the shutdown of industries and also due to lower aggregate demand amid the coronavirus outbreak.

The Federal Board of Revenue (FBR) tax collection was short by Rs200 billion in March 2020. Pakistan’s budget deficit is expected to shoot up to 9.0% of the gross domestic product in FY20 and subsequently clock in at 8.0% of GDP in FY21.

Moody's Investors Services, in the latest report, said Pakistan would see a marked weakening in debt metrics because of large gross borrowing needs that raise interest payments when borrowing costs rise, and/or narrow revenue bases that push fiscal deficits wider when interest payments rise.

Originally published in The News