Debt sustainability indicators worsen in Pakistan

ISLAMABAD: Pakistan’s major debt sustainability indicators have witnessed marked deterioration during the first half of this fiscal year in the middle of steep currency devaluation and interest rates hikes, The Tribune reported.

The report showed that the share of external debt in the total public debt rose from 37% in June to 37.2% by December, heightening the currency risks simultaneously with the rupee sinking and foreign countries shying away from extending loans.

This is synchronous with interest rates at historic highs and the currency devaluing by 56% since the incumbent government came into power a year ago, The Tribune reported. Although the government is not inclined towards debt restructuring, worsening indicators coupled with a lack of adequate foreign funding suggest that Pakistan will soon have to embrace this path.

According to a debt bulletin by the Ministry of Finance in dollar terms, Pakistan’s total public debt stood at USD 233 billion by December, including USD 86.6 billion in external public debt.

The country needs to service 28% of its debt in just one year, which is quite a big chunk and will expose the nation to all types of debt-related risks.

The floating rate domestic debt is now PKR 22.5 trillion or 68% of domestic debt, which is poisonous due to interest rates at a record 20%. In rupee terms, public debt jumped to PKR 52.7 trillion, an addition of PKR 3.6 trillion during the first half of the fiscal year.

The rupee depreciation added PKR 2.3 trillion to public debt in six months, contributing a rise of 63% to the debt during this period.

The interest expenses amounted to PKR 2.27 trillion during the first half of the fiscal year, equal to 72% of the surge in public debt during this period.

A total of PKR 17.1 trillion or 52% of government debt is held by commercial banks. (www. www.dtnext.in/)