Domestic debt soars while foreign debt declines; World Bank cancels $500 million loan support
Islamabad [Pakistan], December 17: Amid a deepening economic crisis, Pakistan’s total debt surged by PKR 4.3 trillion in the first eight months of the current fiscal year, according to official documents cited by ARY News.
As of October 2024, the country’s total debt stood at PKR 69.114 trillion, marking a significant increase from PKR 64.810 trillion in February. The increase is driven primarily by a rise in domestic borrowing, while foreign debt saw a marginal decline.
Key Debt Figures
The domestic debt rose by PKR 4.556 trillion, bringing it to PKR 47.231 trillion in October from PKR 42.675 trillion in February. In contrast, foreign debt decreased slightly by PKR 251 billion, standing at PKR 21.884 trillion as of October, compared to PKR 22.134 trillion earlier this year.
World Bank Loan Withdrawal
The debt crisis deepened further after the World Bank cancelled a budget support loan of over USD 500 million last week, citing Pakistan’s failure to meet key conditions, including revising power purchase agreements under the China-Pakistan Economic Corridor (CPEC).
According to a report by The Express Tribune, the World Bank has also announced that it will not provide any new budget support loans during the current fiscal year, jeopardizing Islamabad’s expectation of receiving USD 2 billion in fresh loans. A significant factor behind this decision is Pakistan’s near exhaustion of its loan quota.
Record Debt Levels
In October, Pakistan’s government debt reached a record high of PKR 70.36 trillion, sparking serious concerns about the nation’s economic stability. Data from the State Bank of Pakistan (SBP) revealed that federal debt increased by PKR 1.448 trillion in the first two months of the current fiscal year, with PKR 739 billion added in August alone.
From September 2023 to August 2024, Pakistan’s total federal debt jumped by PKR 6.392 trillion. As of August 2024:
- Domestic debt accounted for PKR 48.339 trillion.
- External debt stood at PKR 22.023 trillion.
Economic Challenges
Pakistan’s rising debt burden, coupled with the withdrawal of international financial support, underscores the pressing need for fiscal reforms and improved economic management. With domestic borrowing on the rise and limited external relief, the country faces increasing financial pressure to stabilize its economy.
