ISLAMABAD: The federal government’s total debt increased to Rs36.537 trillion by end-January as against Rs32.997tr in the same period last year, up by almost 11 per cent, or Rs3.54tr.

Latest data released by the State Bank of Pakistan on Friday showed the central government’s domestic debt also increased to Rs24.502tr at the end of first seven months of 2020-21 when compared to Rs21.794tr, an increase of 12.4pc, or Rs2.71tr.

Central government external debt at the end of January has been reported at Rs12.035tr against Rs11.202.7tr of the comparable period last year, showing an increase of Rs832bn or 7.42pc.

Despite the overall incre­ase in debt situation, the SBP data, however, showed that major increase was reported in the long-term domestic debt, up by about 15.63pc to Rs19.367tr against Rs16.748tr by end-January last year. In absolute terms, the long-term debt increased by Rs2.62tr in a year.

On the other hand, the short-term domestic debt increased by only Rs89bn to Rs5.136tr at end-January this year as against Rs5.047tr last year, up by 1.76pc. This apparently was part of the government strategy to prolong the profile of the debt to stagger debt servicing obligations.

The SBP data also put the total domestic permanent debt at Rs15.692tr, showing a massive increase of 17.83pc, or Rs2.375tr, in a single year from Rs13.317tr reported at the end of January 2020.

This included a major portion of about Rs15tr worth of federal government bonds by end of first seven months of current fiscal year against Rs12.581tr reported at the end of first seven months of last year. Even out of this, the major chunk of Rs14.16tr pertained to Pakistan Investment Bonds as against Rs12.33tr of same period last year. The long-term PIBs are not only preferred by domestic but also by foreign investors as these bonds offer higher returns.

On the other hand, domestic debt on account of prize bonds declined by 6.5pc to Rs686bn this year as against Rs734bn at the end of first seven months of last fiscal year.

Total unfunded debt amounted to Rs3.668tr by end of January this year when compared to Rs3.424tr of same period last year.

The government relies heavily on the markets for borrowing to meet fiscal deficit after its agreement with the International Monetary Fund that restricts borrowing from the central bank for deficit financing.

Published in Dawn, March 6th, 2021