Total Public Debt of Pakistan 1971-2019


Total public debt refers to how much a country owes to institutions, individuals or other governments. Every country has its own definition of total debt as some countries include all loans as well as liabilities for repayment in the total debt while Pakistan’s public debt excludes liabilities from the total public debt. Pakistan’s total debt includes debt owned by both Federal and Provincial governments in form of Government Domestic debt, Government External debt, Debt from IMF, Private Sector External debt, and Commodity operations.

Significance of Public Debt for Pakistan

The main aim of public debt management is to use medium to long term minimum cost loans for fulfilling the requirements of financing as and when needed by the government. The term public debt is considered positive as long as the economic benefits from a debt exceed its cost, given that they are invested in projects and policies that can enhance growth of a country.

However, Pakistan, over the decades has seen both good and bad sides of public debt management due to inconsistent changes in regimes and differences between economic approach of each government. The total debt holds great significance for Pakistan’s economy as the government needs foreign exchange reserves and current account surplus to support refinancing and servicing of debts. The debt is highly dependent on economic strength of Pakistan as any devaluation of Pakistani rupee affects the value of money owed in terms of foreign currency reserves.

History of Public Debt in Pakistan

The chart below shows the growth of total public debt of Pakistan from 1971 to 2019. The chart also shows the values for total domestic debt and total external debt that add up to the total debt.

From the chart of GDP growth over past several decades (See here), we can see that during 1970s and 1980s when total debt of Pakistan rose from Rs. 30 billion to around Rs. 700 billion, the GDP growth rate was also positive and stable and the economy expanded during the period. From 2000 and onward when Musharraf’s government took over the reign, the total debt of Pakistan only rose by 51% from Rs.3162 billion to Rs. 4802 billion and the GDP growth rate remained stable in range of 4% to 7%. Moreover, the era saw rise in employment rate and growth of industries which indicated positive use of public debt.

However, the increase in debt in Pakistan has not always been a positive indicator. During the Peoples Party (PPP) regime from 2008 to 2013, the total debt of Pakistan rose by 135% reaching around Rs. 17,381 billion in 2013. At the same time, due to corruption and inconsistent policies of government, the GDP growth rate dropped to 1.7% in 2008 and remained around 4% till 2013. Most of the debt taken during this period was domestic debt due to global financial crisis of 2007-2008 that affected liquidity position of foreign lenders.

The total public debt of Pakistan saw a sharp rise in domestic debt during 2014 and onwards as PMLN invested heavily on infrastructure along with the issuance of Sukuk bonds and CPEC related loans.

Current Debt Situation in Pakistan

Since 2018, Pakistan’s total debt has been rising sharply reaching current level of around Rs. 40.99 trillion against Rs. 33 trillion in January 2019 (Tribune, 2020). The level of total debt and liabilities of the country remains at 104.3% of GDP while repayments on liabilities is not part of this figure. Several factors contribute to this blasting figure including the higher interest rates in Pakistan since 2018 where 1% increase in interest rate means increase of around Rs.180 billion in debt servicing. Other factors include increased IMF loans for clearing of circular debts, Rupee devaluation, and loans from China, Saudi Arabia and UAE to support balance of payment account of the country.

While a lot of debt crisis was passed on from the previous government, the monetary policies of present government to bring reforms under IMF program have also contributed greatly towards this record level of debt. The increased interest rates from 4.09% in 2017 to 13.2% in 2020 has put an extraordinary pressure on public debt management of Pakistan. The federal government in February, 2020 announced that they will bring the ratio of Debt to GDP down by at least 2% by July this year. However, given the current scenario of economic crisis due to Coronavirus, the monetary policies of government cannot be evaluated for a stable outcome. The fall in rupee against the dollar recently can cancel the positive effect that decreased policy rate could have on total debt.


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