In the first quarter of the current fiscal year, Pakistan’s total debt and liabilities increased by 12 trillion Pakistani Rupees (Rs), or 23.7%, as a result of a loan commitment from the IMF and the depreciation of the rupee.
The debt and obligations for the fiscal year 2022–2023 in July–September were Rs. 62.46 trillion, which is more than the Rs. 50.49 trillion for the same period in the previous fiscal year. The nation’s overall liabilities climbed by 23% to Rs3.56 trillion, while its debt increased by 24.7% to Rs59.37 trillion.
The head of the research at Ismail Iqbal Securities, Fahad Rauf, said that the increase in the debt was mainly by the external sources. “Mostly the IMF [International Monetary Fund] loan tranche of USD 1.2 billion and the impact of the rupee depreciation on overall external debt,” he said.
Domestic debt held by the government rose by 18.7% to Rs. 31.40 trillion. According to data from the State Bank of Pakistan (SBP), the foreign debt was Rs 17.99 trillion in July–September FY2023, up 30.2% from the previous year, according to The News International.
External debt and liabilities as a whole increased 33.4% to Rs 28.94 trillion.
“Managing debt obligations is one of the biggest challenges facing the government,” said Mustafa Mustansir, head of research at Taurus Securities.
The five-year currency default swap (CDS) index, which measures the risk of default for countries, showed a gain of 4.2 percentage points on Monday, reaching a new high of 64.2%. According to The Express Tribune, the development shows that Pakistan lacked the wherewithal to timely fulfil its rising import obligations and international debt.
On December 5, 2022, a five-year Sukuk (a bond that complies with Islamic law) due from Pakistan is due to maturity. The yield (rate of return) on the Sukuk climbed by 964 basis points in a day to 69.96%, according to Topline Research. Investors may have speculated that Pakistan could default on the $1 billion Sukuk based on the rise in yield.