KARACHI: Pakistan’s total debt and liabilities experienced a notable increase of 29% in the fiscal year 2023, reaching Rs77.104 trillion, up from Rs59.772 trillion in FY22, according to data released by the State Bank of Pakistan. Despite this, the country’s gross external debt decreased by $6 billion in the same fiscal year, standing at $124.3 billion compared to $130.3 billion in FY22.
The data revealed that total debt and liabilities as a percentage of GDP rose to 91.1%, up from 89.7% in FY22. Excluding liabilities, the total debt for FY23 amounted to Rs72.991 trillion, compared to Rs56.837 trillion in FY22, marking a growth of 28.4%. Domestic debt also saw a rise, reaching Rs38.8 trillion in FY23 from Rs31.085 trillion in the previous fiscal year.
The increase in debt has a significant impact on the economy, evident from the debt servicing expenses. Debt servicing reached Rs9.819 trillion in FY23, compared to Rs5.578 trillion in FY22, representing a year-on-year growth of 76% and accounting for 11.6% of GDP, compared to 8.4% in FY22.
Of this debt servicing expense, interest payments on debt accounted for Rs5.935 trillion, compared to Rs3.331 trillion in the previous fiscal year. Pakistan’s GDP also saw a significant increase, rising to Rs84.657 trillion in FY23 from Rs66.623 trillion in FY22.
Pakistan’s Fiscal Challange
While external debt size decreased in FY23, external debt servicing increased by nearly 25%. The government faced challenges in borrowing due to political and economic uncertainties, struggling to secure an IMF loan. However, it managed to secure a Standby Arrangement of $3 billion for nine months, which facilitated inflows from Saudi Arabia and the UAE and enabled the rollover of certain Chinese loans.
In FY24, Pakistan is projected to spend around Rs7.3 trillion on debt servicing, which constitutes 50.5% of the total budget outlay of Rs14.46 trillion. This leaves limited resources for development projects and other expenditures, necessitating further borrowing from domestic and foreign sources.
