Domestic debts cross Rs 3.6 trillion mark

KARACHI (March 16 2009): Domestic debts surged by 10 percent to the record level of Rs 3.6071 trillion during seven months of the current fiscal year, from Rs 3.2661 trillion on June 30, 2008, due to a significant rise in fiscal deficit and slow foreign inflows.

The slow inflows on the back of slow privatisation process during the past one-and-a-half years and less than target revenue collection compelled the government to borrow more from the domestic market, economists said.

The rising fiscal deficit and high current expenditure also raised the government reliance on domestic debts as well as external debts to meet its financial requirements, they added.

The State Bank of Pakistan has said that the countrys overall stocks of domestic debts, including permanent debt, floating debt, and un-funded debt, have registered a growth of 10.44 percent during seven months of the current fiscal year.

With this upsurge, the outstanding amount of overall domestic debts mounted to a new peak of Rs 3.6071 trillion by the end of January 2009 as compared to Rs 3.2661 trillion as on June 30, 2008, depicting an increase of Rs 341 billion in July-January of 2008-09. Major increase was witnessed in the floating and un-funded debt, which amounted to 16 percent and 7.14 percent, respectively, while the permanent debt showed a less rise of 0.11 percent during this period.

Tremendous rise in overall debt stocks was driven by the healthy growth in the floating debt category, which includes three months treasury bills, market treasury bills and MTBs for replenishment.

The floating debt went up by Rs 267.3 billion during July-January as compared to Rs 235 billion in the same period of last fiscal year. The floating debts stocks touched the peak level of Rs 1.9047 trillion by the end of January 2009, from Rs 1.6374 trillion in June 2008. However, outright sale of MTBs to the commercial banks was not included in the stocks of floating debts.

Permanent debts, which include market loan, federal government bond, income tax bond, etc, went up by Rs 0.7 billion, to Rs 609.1 billion in January 2009 from Rs 608.4 billion in June 2008.

Un-funded debt, based on national saving, rose by Rs 72.9 billion to Rs 1.0933 trillion in January 2009 from Rs 1.0204 trillion in June 2008. "Higher fiscal deficit and low privatisation process pushed the domestic outstanding during seven months," economists said.

They said that presently the government was also increasing its borrowing from the saving schemes, as a result of which the overall stocks of un-funded debts were likely to further increase in the near future.