• Public debt rises 13% in FY2024, hitting Rs71.2 trillion.
• Govt misses debt reduction targets under FRDLA.
• External debt reaches $88.7bn as of September 2024.
  

ISLAMABAD: Despite making progress in reducing the debt trajectory, the government has failed to meet the overall public debt reduction targets outlined in the Fiscal Responsibility and Debt Limitation Act, which was approved by parliament, The News reported.

Although the government has fallen short of its commitment to parliament in curbing public debt, primarily due to fiscal imbalances, it remains to be seen whether parliament will assert its authority by raising questions to ascertain reasons behind this perpetual failure in achieving its envisaged limits to curtail the debt burden.

The debt report of the Ministry of Finance shows that total public debt of the country stood at Rs71.2 trillion in FY2024 against Rs62.8 trillion in FY2023, going up by Rs8.34 trillion in a one-year period.

During FY2024, total public debt increased by 13% to stand at Rs71.24 trillion in June 2024, out of which domestic debt was Rs47.16 trillion and external debt in rupee terms was hovering around Rs24.08 trillion. 

During Q1 FY2025, there was a marginal increase of 1.3% in public debt to stand at Rs72.13 trillion. In terms of debt-to-GDP ratio, total public debt showed a decrease of 7.7%, to stand at 67.2% at end-June 2024 against 74.9% of gross domestic product (GDP) in FY2023.

Total external debt continued to increase during Q1-FY2025, to stand at $88.7 billion as of September-end 2024. In terms of external debt composition, more than half of Pakistan’s external debt (56% as of September 2024) is from multilateral development financial institutions, including the International Monetary Fund (IMF). 

Second major source of external debt is from bilateral partners, including the Paris Club, which has approximately 28% share of external debt. 14% of external debt is from commercial sources, 8% from international bond issuances and 6% from commercial banks.

During FY2024, the stock of external debt (in USD) witnessed a net increase of 3% YoY, while the share of external debt in total public debt decreased from 38% (June 2023) to 34% (June 2024). 

Although the external debt exposure is still within the maximum limit of 40% as envisaged in Medium Term Debt Strategy (MTDS), it remains sensitive to exchange rate movement.

According to Debt Policy Statement prepared by the Ministry of Finance for submission before the parliament, Section 3 of the Fiscal Responsibility and Debt Limitation Act (FRDLA) 2005 pertains to principals of sound fiscal and debt management, wherein the federal government has to take measures to reduce fiscal deficit (excluding grants) and ratio of total public debt to GDP and maintain it within certain prudent limits, which have been defined as debt-to-GDP ratio, of which 60% was stipulated till FY2017-18, with reduction of 0.5% every year till 2022-23 and 0.75% every year till 2032-33 to reduce the ratio to 50% and thereafter maintaining it at 50% or less.

In September 2024, the total public debt stood at 67.2% against the envisaged target under FRDLA of 61%, so it missed out.