Forex, PSE and bank liabilities not included: 88.8 billion dollars of external debt recorded at the end of March

ISLAMABAD: External public debt was recorded at $88.8 billion at the end of March 2022 in the Economic Survey 2021-22, but it does not include foreign currency liabilities, public sector enterprises (PSEs), banks and the private sector.

According to data from the State Bank of Pakistan (SBP), total external debt liabilities stood at $128.92 billion as of March 2022, which includes short term government external debt from the Monetary Fund (IMF) as well as foreign currency liabilities, public sector enterprises, banks and private sector.

The survey noted that Pakistan’s total public debt was recorded at 44.366 trillion rupees at the end of March 2022, registering an increase of 4.5 trillion rupees in the first nine months of the current financial year.

The survey noted that the Rs 4.5 trillion increase in the first nine months of the current financial year was much higher compared to the Rs 1.607 trillion increase seen in the same period the last year and includes 1047 billion rupees federal primary deficit, 2118 billion rupees. interest on debt, 1,744 billion rupees on currency depreciation and 409 billion rupees on government cash balance.

Besides financing the federal budget deficit, the depreciation of the Pakistani rupee against the US dollar by about 26 percentage points has led to a significant increase in the value of external public debt when converted into Pakistani rupees, a- he added.

The survey noted that external public debt stood at $88.8 billion at the end of March 2022, increasing by about $2.3 billion in the first nine months of the current fiscal year. This increase indicates that debt from multilateral and bilateral sources increased by $2.9 billion.

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Gross inflows of about $1 billion were recorded from the IMF under the Extended Financing Facility (EFF), $0.8 billion from the Development Bank (IDB) and $3 billion from term deposits Saudis. Commercial loan debt outstanding recorded a net decrease of approximately $1.5 billion. It was mainly due to repayment of installments from Chinese commercial banks for an amount of $2.3 billion in March 2022. However, this amount is expected to be received in June 2022.

The government raised $2 billion through international bond issues (1 billion Eurobonds in July 2021 and $1 billion in sukuk in January 2022) while repaying $1 billion on sukuk expiring. As a result, the stock of Eurobonds/Sukuks recorded a net increase of $1 billion in the first nine months of the current fiscal year. The stock of Pakistan Banao certificates and Naya Pakistan certificates increased by $0.5 billion; and the stock of investment by non-residents in government securities (Treasury bills and BIP) fell by $0.6 billion.

Gross disbursements of external loans were recorded at $12,779 million5 in the first nine months of 2021-22 including $4,929 million from multilateral sources, $3,228 million from bilateral sources, Saudi deposits amounted at $3 trillion, disbursements through international bonds amounted to $2 trillion and commercial deposits. loans contributed $2,623 million in total disbursements.

External public debt repayments were recorded at $8,139 million in the first nine months of 2021-2022, compared to $5,148 million in the same period last year. This increase in reimbursements is mainly due to; (i) the resumption of debt repayments to bilateral creditors in the third quarter of 2021-22, which were postponed under the Debt Service Suspension Initiative (DSSI); (ii) $1,000 million of international Sukuk maturing in October 2021; and (iii) higher repayment of commercial loan maturities.

Interest payments were recorded at $1,297 million in the first nine months of 2021-22, compared to $1,080 million in the same period a year earlier. The main factors that increased external interest service in the current fiscal year were (i) the resumption of interest payments to bilateral creditors in the third quarter of fiscal year 2021-22, which were deferred in the framework of the DSSI; (ii) rising global interest rates; and (iii) higher interest service on the commercial loan portfolio and Eurobonds.

The survey noted that external borrowings were contracted in various currencies; however, disbursements are actually converted into Pak Rupee. Since Pak Rupee is not an internationally traded currency, other international currencies are bought and sold through the sale and purchase of the US Dollar. Therefore, foreign debt currency exposure comes from two sources: US dollar/other foreign currencies and Pakistani rupee/US dollar. Thus, any movement of the international currencies (in which the debt is contracted) and the PKR against the US dollar can change the value of the dollar and the Pakistani rupee of the external debt respectively. However, it should be taken into account that the domestic debt does not involve any exchange risk since it is denominated in Pakistani rupees.

In addition to net external inflows, the following factors influenced the evolution of the stock of external public debt during the first nine months of the current fiscal year: in US dollars, the revaluation gain due to the appreciation of the US dollar against other international currencies has outstanding government debt of about $1.6 trillion.

This decrease is mainly due to an appreciation of the US dollar against the Japanese yen by 10%, the euro by 7%, the pound sterling by 6% and the special drawing right (SDR) by 3%; these translation gains due to the appreciation of the US dollar against other international currencies were offset by the depreciation of the Pakistani rupee against the US dollar by approximately 17%, resulting in an increase in the rupee value external debt of about 2.3 trillion rupees.

Domestic debt was recorded at Rs 28,076 billion at the end of March 2022, registering an increase of Rs 1,811 billion in the first nine months of the current financial year.

Interest service was recorded at Rs 2,118 billion in the first nine months of the current financial year against its annual budget estimate of Rs 3,060 billion. Domestic interest payments were recorded at Rs. 1,897 billion and constituted about 90% of total interest service, which is mainly attributable to a higher volume of domestic debt in the total public debt portfolio.

The survey noted that permanent debt mainly comprises medium and long-term instruments like GDPs, government Ijara Sukuks and price bonds. Permanent debt constituted 67% of the domestic debt portfolio and was recorded at 18.714 billion rupees at the end of March 2022, an increase of 2.803 billion rupees in the first nine months of the current financial year.

The bifurcation of this increase reveals that the net government mobilization through the issuance of GDP and GIS was Rs 1,939 billion and Rs 1,111 billion respectively, while a net retreat amounting to Rs 178 billion and Rs 70 billion was observed in Bai-Muajjal Sukuk stock and Price Bonds, respectively.

Floating debt was recorded at 5,241 billion rupees, or about 19% of the total domestic debt portfolio at end-March 2022. been observed in the stock of treasury bills.

The stock of unfunded debt stood at Rs 3.609 trillion at the end of March 2022, constituting about 13% of the total domestic debt portfolio. Unfunded debt recorded a net reduction of Rs 37 billion in the first nine months of the current financial year.

In addition to the above, domestic debt also includes: (i) Naya Pakistan Certificates (held only by residents), which amounted to Rs 37 billion at the end of March 2022; and (ii) the on-lending of the SBP to the Federal Government against the allocation of SDRs from the IMF, which amounted to 475 billion rupees at the end of March 2022.

Copyright Business Recorder, 2022

Shirlene J. Manley