Public debt rises by Rs1.45tr in FY25's first five months

• Govt's expenditures "exceeded" revenue collection in Nov 2024.
• SBP data shows that domestic debt climbed by 3%.
• Central bank emphasises importance of fiscal reforms.

KARACHI: As per the data provided by the State Bank of Pakistan (SBP), the public debt on Pakistan has reached Rs70.366 trillion after growing by 2.1% (Rs1.452 trillion) in the first five months of the ongoing financial year, The News reported on Tuesday.

This increase resulted from the need to pay off external debt and the government's expenditure demands exceeding its revenue collection. The total debt, as of June 30, 2024, was Rs68.914 trillion.

By November end, the centre's overall debt stock had grown 11% year over year (YoY) and 1.8% month over month.

"The federal government's spending needs have exceeded revenue collection in November 2024, resulting in an increase in government debt," stated the AKD Securities Limited’s director of research, Awais Ashraf. However, he said, the government repaid external debt equal to $434 million last month.

“Regarding local debt, the government has adjusted its mix towards longer tenure by increasing long-term debt by Rs1.8 trillion while reducing reliance on T-bills by Rs544 billion,” Ashraf maintained.

The central bank data showed that the domestic debt climbed by 3.0%, reaching Rs48.585 trillion during July to November FY25, up from Rs47.16 trillion a year earlier. This represents an 18% increase YoY and a 2.86% rise month-on-month at the end of November.

Similarly, the central government’s external debt increased to Rs21.78 trillion in the five months of FY25, reflecting a slight rise of 0.11%. However, the foreign debt fell by 2.91% YoY and 0.5 % month-on-month at the end of November.

The Federal Board of Revenue (FBR) did not meet its tax collection target for November, collecting Rs852 billion instead of the targeted Rs1,003 billion, resulting in a shortfall of Rs151 billion.

In a monetary policy statement issued in December 2024, the SBP emphasised the importance of fiscal reforms to broaden the tax base to achieve targeted fiscal consolidation. The SBP noted that on the expenditure side, declining yields would lead to significant savings in interest payments on domestic debt compared to budget estimates. 

These reduced interest payments will assist the government in managing the fiscal deficit; however, achieving the planned primary surplus will be challenging. As such, considerable efforts and additional measures will be necessary to meet the annual revenue target.

According to the auction calendar released by the SBP, the government plans to raise Rs5.25 trillion through the sale of treasury bills and bonds from January to March to fulfill its budgetary needs and repay debt. 

The government aims to raise Rs2.2 trillion through the sale of Market Treasury Bills and Rs3.05 trillion through the auction of Pakistan Investment Bonds.