Pakistan’s Record Debt Surge Sparks Economic Stability Concerns

Pakistan's debt has increased by PKR 4,304 billion amid an ongoing economic crisis, reaching a staggering PKR 70.36 trillion as of October. Domestic debt rose sharply, while external debt slightly decreased. The World Bank cancelled significant loans, impacting financial support and raising concerns about the nation's fiscal stability.

Amid an intensifying economic crisis, Pakistan's debt ballooned by Pakistani Rupees (PKR) 4,304 billion within the first eight months of the current government's tenure, according to ARY News citing official documentation. Official reports state that by October, the total debt had ascended to PKR 69.114 trillion, marking a rise from PKR 64.810 trillion recorded in February.

The tax calendar in Pakistan spans from July 1 to June 30. During this tumultuous period, domestic debt increased by PKR 4,556 billion, while external debt saw a decrease of PKR 251 billion, as reported by ARY News.

Consequently, domestic debt surged to PKR 47.231 trillion as of October, up from PKR 42.675 trillion in February, whereas foreign debt fell to PKR 21.884 trillion from PKR 22.134 trillion. In a concurrent development, the World Bank withdrew budget support amounting to over USD 500 million due to Islamabad's non-compliance with essential conditions, including renegotiation of power agreements under the CPEC framework, as detailed by The Express Tribune.

The Washington-based financial body announced it would refrain from extending new budget support within the current fiscal year, potentially affecting governmental forecasts of securing additional USD 2 billion in loans. Reports attribute this halt in financial aid to Pakistan's nearing the limits of its loan quotas.

In October, the debt owed by the Pakistani government reached an unprecedented PKR 70.36 trillion, a daunting figure that has fueled widespread apprehension about the country's financial health, according to ARY News. Federal government obligations rose by PKR 1,448 billion during the first two months of the fiscal year, with PKR 739 billion increased in August alone, as revealed by State Bank of Pakistan (SBP) data.

The total federal debt saw an alarming increment of PKR 6,392 billion from September 2023 to August 2024. As of August 2024, domestic debt represented PKR 48,339 billion while the external debt was quantified at PKR 22,023 billion, as cited by ANI.

(With inputs from agencies.)