The central government debt in Pakistan surged by Rs8.07 trillion, reaching Rs68.9 trillion by June 2024, showing a 13% increase from the previous fiscal year. This rapid rise in debt has posed financial challenges for both the government and the public, leading to difficulties in debt servicing and funding development projects.
Despite the mounting debt, the government has not been able to reduce its spending, impacting the Public Sector Development Programme (PSDP) budget and ultimately causing economic contraction and a modest growth rate of 2.4% in FY24.
For the current fiscal year, the government has allocated Rs9.78 trillion for debt servicing, more than half of the total budget outlay. The country’s foreign debt servicing decreased in FY24 due to rollover repayments, with debt indicators showing improvement overall.
Pakistan’s debt-to-GDP ratio fell to 70% in FY24, while the external debt-to-GDP ratio also declined to 26%. Positive developments were also seen in the ratio of external debt servicing to total exports, which decreased to 35%.
Despite challenges, the country is making progress in managing its debt and improving financial indicators, providing hope for a more stable economic future.
Published in Dawn, August 16th, 2024