Pakistan's Debt Reaches Record High of Rs70.4 Trillion

The financial landscape of Pakistan has reached a concerning milestone, as the central government’s debt has surged to an unprecedented level of Rs70.4 trillion as of August 2024. This figure marks a significant increase from Rs63.9 trillion recorded in the same month of the previous year, reflecting a rise of approximately 10 percent within just one year. Such a dramatic escalation in debt raises alarms about the economic stability of the nation and the implications for its citizens.

Breaking down the debt figures, the domestic debt stands at Rs48.34 trillion, while the external debt accounts for Rs22.023 trillion. This division highlights the reliance on both internal and external borrowing to finance government operations. Within the domestic debt, long-term borrowing has reached Rs37.3 trillion, a notable increase from Rs30 trillion in August 2023. Short-term borrowing, on the other hand, is recorded at Rs10.96 trillion, with an additional Rs80 billion sourced from Naya Pakistan Certificates.

Delving deeper into the long-term borrowing, permanent debt constitutes Rs34 trillion, unfunded debt is at Rs2.8 trillion, and foreign current loans amount to Rs374 billion. The Pakistan Investment Bonds (PIBs) have emerged as a significant contributor, with a staggering Rs28.4 trillion recorded in August 2024, up from Rs22 trillion in the same month last year. This indicates a growing trend in the government’s reliance on PIBs to manage its financial obligations.

In the realm of short-term domestic debt, Market Treasury Bills (MTBs) have proven to be the dominant source, with borrowing through this security reaching Rs10.88 trillion. This figure represents a year-on-year increase of 13.72% and a month-on-month rise of 3.02%. Such trends suggest that the government is actively seeking to manage its cash flow through short-term instruments, albeit at the risk of accumulating further debt.

Moreover, the central government debt has seen an increase of Rs1,448 billion in the first two months of the current fiscal year, rising from Rs68.9 trillion at the end of June 2024 to Rs70.36 trillion by August 2024. This upward trajectory in debt levels raises critical questions about the sustainability of such borrowing practices and the long-term economic implications for the country.

As the government grapples with these mounting debts, it is essential for policymakers to devise strategies that not only address the immediate financial needs but also ensure economic stability in the long run. The rising debt levels could potentially lead to higher taxes, reduced public spending, and increased inflation, all of which would directly impact the daily lives of citizens. Therefore, it is crucial for the government to strike a balance between borrowing and sustainable economic growth, ensuring that future generations are not burdened by the financial decisions made today.