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Mixed view on public debt in first 9 months of this fiscal

Economic leaders of Pakistan calculating that the country’s debt-to-GDP ratio has been growing since FY 2008 and even mentioned that the portion of total debt which has a direct charge on government revenues also the debt attained from the International Monetary Fund (IMF) is defined as public debt. Public debt has two major components like; domestic debt and external debt.

The Government of Pakistan has mentioned in its statement that the gross public debt was Rs20,873 billion as at end March 2017 while net public debt was Rs18,893 billion. Gross public debt registered a rise of Rs1,194 billion during first nine months of fiscal year 2016-17. Out of this total rise, rise in domestic debt was Rs1,121 billion while government borrowing from domestic sources for financing of fiscal deficit was Rs1,018 billion. This differential is chiefly attributed to rise in government credit balances with the banking system. Similarly, rise in external debt contributed Rs73 billion in public debt. Revaluation gain on account of appreciation of US dollar against other foreign currencies declined the impact of net external inflows on external public debt portfolio.

Some experts also calculated that the average cost of gross public debt was declined by 40 basis points during first six months of FY 2016-17 owing to smooth execution of the MTDS.


The average cost of domestic debt portfolio was declined over 50 basis points during first six months of FY2016-17 while the average cost of external loans obtained by the present government comes to almost 3 percent, which is considerably lower than the domestic financing cost even after a margin of capital loss because of rate depreciation is added. The government was able to mobilize external inflows from multilateral and bilateral development partners and continued its presence in foreign capital markets by the issuance of Sukuk during first nine months of FY 2016-17.

An improvement was observed in most of the public debt risks indicators during last three and half years inline with the objectives set forth in Pakistan’s first MTDS (2013). Refinancing risk of the domestic debt portfolio declined through lengthening of the maturity profile as percentage of domestic debt maturing in one year was declined to 52.7 percent at the end of December 2016 as against with 64.2 percent at the close of June 2013.

Exposure to interest rate risk was also declined as the percentage of debt re-fixing in one year declined to 45.5 percent at the close of December 2016 as against to 52.4 percent at the close of June 2013. Similarly, share of external loans maturing within one year was equal to almost 31.9 percent of official liquid reserves at the close of December 2016 as against with almost 68.5 percent at the close of June 2013 showing improvement in foreign exchange stability and repayment capacity.

It is also mentioned in a statement that during first half of fiscal year 2016-17, the Government of Pakistan issued fresh/rollover guarantees aggregating to Rs368 billion or 1.2 percent of GDP. The outstanding stock of government guarantees as at end December 2016 was registered at Rs838 billion. On the other hand the economic leaders mentioned that the public debt servicing was registered at Rs1,410 billion during first nine months of FY 2016-17.


However, public debt servicing consumed nearly 45 percent of total revenues during first nine months of FY 2016-17 against a ratio of 46 percent during the same period previous year.

Domestic interest payments constituted almost 72 percent of total debt servicing which is because of higher volume of domestic debt in public debt portfolio. Domestic interest payments were registered at Rs1,010 billion during first nine months of FY2016-17 as against with Rs1,003 billion during the same period previous year.


This slight increase in interest payments was chiefly driven by rise in domestic debt stock during the period. Out of total domestic interest payments, large portion was paid against PIBs (Rs457 billion), National Savings Schemes (Rs203 billion), T-Bills (Rs164 billion) and Market Related Treasury Bills (Rs119 billion). Furthermore, because of re-profiling of the domestic debt by the government, experts mentioned that the domestic interest cost is predicted to remain almost at the same level in the upcoming year despite rise in domestic debt volume.

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