- The government’s domestic debt stood at Rs47,536tr in the first quarter of FY25.
- External debt increases to Rs22,034tr during the July-September period.
- The total external debt reached $133.4 billion compared to $129.7 billion in September 2023.
KARACHI: As part of the incumbent government’s continued efforts to improve economic indicators, the country’s debt-to-GDP ratio fell to 65.7 percent, its lowest level since June 2018, News reported Tuesday.
According to Arif Habib Limited, the domestic debt to GDP ratio stood at 43.1%, while the external debt to GDP ratio was recorded at 22.7%.
Data released by the State Bank of Pakistan (SBP) shows that the government’s debt saw a decline of Rs792 billion or 1 percent month-on-month in September, highlighting the reduction in the government’s financing needs resulting from budget surplus, a record level. central bank profits and prudent spending management.
The government’s total debt stock fell to 69.57 trillion rupees at the end of September 2024, from 70.362 billion rupees at the end of August 2024.
However, the debt increased by Rs656 billion in the first quarter of the current financial year. As of June 30, 2024, the debt stood at Rs68,914 trillion.
The latest debt figures come amid ongoing negotiations between Pakistan and the International Monetary Fund (IMF) with the latter’s team in Islamabad to assess the country’s progress under the Rs 7 billion loan program. dollars.
The main objective of the IMF team is to assess Pakistan’s external financing gap and measures taken to address the tax collection gap.
Furthermore, SBP data reveals that the government’s domestic debt reached Rs 47,536 billion in the first quarter of FY25, an increase from Rs 47,160 billion at the end of last fiscal year.
However, on a monthly basis, the domestic debt declined and was recorded at Rs48.339 trillion at the end of August.
Moreover, the government’s external debt increased to Rs 22,034 trillion in the July-September period of FY25 from Rs 21,754 trillion at the end of June. At the end of August 2024, the external debt stood at Rs22,023 trillion.
“Government debt grew at its slowest pace in the first quarter since the first quarter of fiscal 2022. This deceleration in debt growth is attributed to the government’s first budget surplus in 20 years, recorded in the first quarter of this financial year,” said Awais Ashraf, Head of Research, AKD Securities Limited.
“The government declared a record primary surplus of Rs 3,000 billion and a fiscal surplus of Rs 1,700 billion for the first quarter,” he added.
“This positive result is due to a historic amount of Rs 2.5 trillion in dividends received from the State Bank of Pakistan and a significant 26% increase in tax revenue collected by the Federal Board of Revenue (FBR), as well as prudent management on the expenditure front,” noted Achraf.
Meanwhile, Saad Hanif, head of research at Ismail Iqbal Securities, estimates that the central government’s debt increased from Rs 62.3 trillion in September 2023 to Rs 69.6 trillion in September 2024, with emphasis on long-term debt.
“As domestic borrowing increased, the government favored long-term debt, actively buying back Treasury bills and extending short-term debt to longer maturities.
“External debt has remained stable with minor increases, and a slightly stronger Pakistani rupee has softened its impact in rupee terms. This shift towards long-term debt could bring more stability and reduce refinancing risks, although overall debt levels continue to rise,” he said.
Additionally, SBP statistics show that Pakistan’s debt and liabilities increased to Rs 85,836 billion during the July-September period of FY25. This is up from Rs 78,419 billion. rupees during the same period last year.
In dollar terms, the country’s total external debt and liabilities reached $133.4 billion for the July-September period of FY25, up from $131 billion at the end of June and $129.76 billion at the end of September 2023. Public external debt amounted to $100.619 billion. as of September 30, 2024.
The central bank told analysts following last week’s monetary policy meeting that the overall stock of debt had declined and the composition of debt had improved. Furthermore, the maturity profile of these debts has also improved due to the increase in the share of multilateral debts.
The profile of outstanding domestic debt also improved as the share of short-term treasury bills fell to 21% over four months of FY25 from 24% at the end of FY24 The authorities expect this share to fall below 20% by the end of FY25.
Reduction in interest rates, in line with the SBP, and timely utilization of surplus funds for debt profiling are expected to significantly reduce the government’s debt servicing costs in FY2025.
The government’s total interest expense for FY25 is now estimated at Rs 8.5 trillion, compared to Rs 9.8 trillion projected in the current fiscal year’s budget. This reduction translates into total savings of 1.3 trillion rupees, or approximately 1.0% of gross domestic product.
These savings will help control the fiscal deficit for FY25. The SBP estimates that gross financing requirements should be met. Out of a total of $26.1 billion in external repayments for FY25, the country needs to repay $6.3 billion in the remaining eight months of the current fiscal year.