ISLAMABAD: Active interest of banks in long-term Pakistan Investment Bonds (PIBs) will improve the maturity profile of the domestic debt significantly in remaining quarter of the fiscal year.
An official source at Ministry of Finance and Revenue told this scribe here on Saturday that public debt had increased by Rs 277.9 billion in the third quarter with the significant additions to the domestic debt stock.
Moreover, the source said that after the receipt of the $ 2 billion from Eurobonds and $ 1.4 billion from International Financial Institutions (IFIs), the share of external financing would increase significantly during the fourth quarters of the current fiscal year.
“Although, the shift towards external financing will help reduce the roll-over and interest rate risks from over reliance on short-term domestic financing, this will lead to an increase in external debt servicing,” the source added. “The country’s repayment capacity of the external debt has ever been a source of some concern for the economic managers,” the source highlighted, adding that it was not surprising that the mobilisation of $ 2 billion through the Eurobonds had raised concerns about the buildup of external debt.
The source said that although country’s market debt had increased from $ 1.6 billion to $ 3.6 billion in recent months, yet the debt vulnerability was far less than many emerging market countries and members of the Organisation for Economic Co-operation and Development (OECD).
It is pertinent to mention here that the country has already surpassed the limit set for domestic and external debts in the Fiscal Responsibility and Debt Limitation (FRDL) Act (2005), which required public debt to be less than 60 percent of GDP by end of fiscal year 2012-12 and falling subsequently. Since, this has not happened only a structural improvement in the country’s fiscal indicators can put the country’s debt burden on a sustainable path.
