Domestic debt balloons to Rs3.9 trillion

[Naveed Yaseen]

By Israr Khan
ISLAMABAD: Pakistan’s economy, already grappling with mounting external debt, is now facing another challenge of increasing domestic debt.

This indicates that the country is eating up more resources than it generates. Rough estimates of the State Bank of Pakistan (SBP) data reveal that during the last one year, the PPP-led government has added about $14 billion to the stock of country’s public debt. Total outstanding domestic debt rose by a worrisome Rs609 billion (or $7.34 billion), as at the end of July 2009.

Domestic debt stood at Rs3.967 trillion against Rs3.358 trillion recorded at the end of July 2008. Besides, external debt and liabilities (EDL) also mounted to $52.83 billion by the end of June 2009, which is equivalent to about one-third of the country’s economy.

Last year, at the end of June 2008, they stood at $46.16 billion, depicting an increase of $6.67 billion over the last year. Rupee’s depreciation against major currencies, especially the US dollar, was another factor contributing to the mounting debt. The central bank’s provisional data released on Tuesday says that the increase in domestic debt was mostly due to a rise in the stock of floating, permanent and unfunded debts. During this one year period, the unfunded debt comprising National Savings Schemes (NSS) till July 2009 went up by Rs274.3 billion to Rs1.305 trillion as last year at the end of the same month it was at Rs1.03 trillion.

Floating domestic debt, mainly comprising short-term debt instruments and market treasury bills, maintained a rising trend and was recorded at Rs1.982 trillion at the end of July 2009, depicting an increase of Rs261.9 billion over the corresponding month when it was recorded at Rs1.72 trillion.

The permanent domestic debt comprising medium and long-term market loans, federal government loans, special government loans, federal instruments and prize bonds, stands at Rs680.6 billion. At the end of July 2008, it stood at Rs607.7 billion. Data reveals that net mobilization under all instruments of the NSS were on the rise during the period under review, against the corresponding period of the last fiscal year.

The reason for this is the attractive interest rate extended by the government on these instruments. Saving instruments such as Bahbood Saving Certificates, Pensioners Benefit Accounts, Special Saving Certificates, Regular Income Certificates and Special Saving Accounts increased, while deposits in Defence Saving Certificates and GP fund accounts declined.

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