Pakistan Government Retires Rs1.9 Trillion Debt with Revenue Surge

The financial landscape of Pakistan has recently witnessed a significant shift, as the government has successfully retired a staggering Rs1.9 trillion in debt. This remarkable achievement comes on the heels of record-high revenues, primarily driven by the petroleum development levy (PDL) and substantial profits from the State Bank of Pakistan (SBP). The backdrop of elevated interest rates and a notable decline in inflation has further bolstered this financial maneuver.

According to the Ministry of Finance’s Monthly Economic Update & Outlook for November 2024, the economy is showing promising signs of recovery. Key indicators such as receding inflation, rising remittances, and increased IT exports are contributing to a stable external and fiscal outlook. In comparison to the previous year, the government has retired Rs1.87 trillion in debt, a significant increase from Rs753 billion during the same period last year. Meanwhile, private sector borrowing has surged to Rs447 billion, contrasting sharply with the Rs153 billion repayment recorded last year.

This impressive debt retirement was made possible by a remarkable 186% growth in federal revenues. The SBP’s surplus profit of Rs2.5 trillion and the petroleum levy played pivotal roles in this financial success. Net federal revenues have soared to Rs4.02 trillion, a substantial increase from Rs1.41 trillion last year. Tax revenues have risen by 25.5%, while non-tax revenues have skyrocketed by an astonishing 567%.

On the expenditure side, total spending has grown modestly by 1.8% to Rs2.48 trillion. This growth has been supported by a 5.3% decline in mark-up expenses, attributed to lower policy rates. As a result of this fiscal discipline, the government has achieved a fiscal surplus of Rs1.9 trillion, equivalent to 1.5% of GDP, a stark contrast to the deficit of Rs981 billion recorded last year. The primary surplus has also reached Rs3.2 trillion, or 2.6% of GDP.

In addition to these fiscal achievements, both the current account and fiscal balance have recorded surpluses during the first four months of FY25, reversing the trend of persistent deficits. The Ministry of Finance has projected that exports will range between $2.5-3 billion, imports between $4.5-4.9 billion, and remittances between $2.8-3.3 billion in November, indicating a positive trajectory for the external sector.

Furthermore, the ministry has highlighted progress in the agricultural sector, noting a remarkable 70.9% increase in imports of agricultural machinery during the period of July to October FY25. Wheat sowing is on track to meet targets, thanks to the timely availability of inputs at reasonable prices. In October, the offtake of DAP (Diammonium Phosphate) rose by 92% year-on-year to 309,000 tonnes, although urea offtake saw a decline of 22% to 358,000 tonnes.

While large-scale manufacturing (LSM) continues to face challenges, there are signs of resilience in key sectors such as textiles and automobiles, with month-on-month growth being observed. The Ministry of Finance has expressed cautious optimism regarding a progressive recovery, emphasizing that fiscal consolidation and external stability are critical drivers of this positive trend.

The government's ability to retire Rs1.9 trillion in debt amidst rising revenues and falling inflation is a testament to its fiscal discipline and strategic financial management. As the economy shows signs of recovery, it is essential for stakeholders to remain vigilant and proactive in addressing ongoing challenges. The path ahead may still be fraught with obstacles, but with continued focus on fiscal responsibility and external stability, Pakistan can look forward to a more prosperous economic future.