Pakistan’s economic problems have been aggravated from last couple of months. Adding to the problems, Pakistan’s total debt and liabilities increased to Rs59.7 trillion in the diamond jubilee year, as the country added Rs12 trillion, or one-fourth of its entire debt accrued in the previous 74 years.
Credit for this worrisome development goes to imprudent fiscal policies and the destructive impact of currency depreciation.
Former Prime Minister Imran Khan vowed that by the end of his term, the overall public debt will be reduced to Rs20 trillion.
In June, the debt soared by Rs3.145 trillion month on month, the greatest monthly increase ever. Higher borrowing from commercial banks to pay the budget deficit as external funding dried up resulted in an increase in the central government’s domestic debt, which grew 18.2 percent to Rs31 trillion in FY2022.
Read more: Addressing the Mountain of Debt
The SBP’s data showed that the country’s total debt-to-gross domestic product ratio increased to 71.4 percent in the last fiscal year, compared with 69.4 percent in FY2021.
In FY2022, Pakistan recorded a record budget deficit of Rs5.5 trillion, above the annual target of Rs4.4 trillion. The increased spending requirement for providing fuel subsidies, as well as the delay in reviving the International Monetary Program and a lack of external finance, all contributed to a growth in the public debt.
The public debt has also continued to rise due to greater interest payments in an environment of rising interest rates. Long-term debt increased to Rs23.7 trillion in FY2022, up from Rs24.2 trillion in FY2021. The short-term debt stood at Rs6.8 trillion, up from Rs6.6 trillion at the end of June 2021.
Foreign debt and liabilities climbed to $130.2 billion in fiscal year ended June 30, 2022, up from $122.2 billion the previous year, as the country borrowed more from multilateral donors and bilateral sources to boost repayment capacity and shore up FX reserves.
The central bank’s latest debt bulletin for fiscal year 2021-22, released on Monday, revealed that the debt burden increased in absolute terms as well as in terms of the size of the national economy, showing that Pakistan is rapidly sinking beneath an unmanageable debt burden.