Pakistan’s public and publicly guaranteed debt to GDP ratio is expected to fall gradually in the upcoming years from 78% recorded at the end of Fiscal Year 2021-22 (FY22) to 71.7% in FY23 and 71.9% in FY24, said a report recently published by the World Bank.
“At the end of FY22, public and publicly guaranteed debt had increased to Rs 52,214 billion (78.0 percent of GDP) from Rs 42,199 billion (75.6 percent of GDP) at end-FY21”, the report titled “Pakistan Development Update, October 2022” said.
It added, the new debt was largely sourced through long-term domestic debt instruments carrying variable interest rates, which improved the overall maturity profile but also increased debt servicing costs and interest rate risks.
Of the total public debt, the share of external debt was 37.6 percent at end-FY22, whereas short-term debt was 13.6 percent. The fiscal deficit reached a record high of Rs 5,260 billion (7.9 percent of GDP) in FY22, up from Rs 3,403 billion (6.1 percent of GDP) in FY21.
However, the report added that in line with fiscal consolidation efforts and lower subsidy expenditures as a share of GDP, the primary deficit (excluding grants) is forecast to narrow from 3.1 percent of GDP in FY22 to 3.0 percent in FY23, despite negative impacts to revenue bases and increased expenditure needs due to the floods.
Similarly, the fiscal deficit is projected to contract by one percentage point to 6.9 percent of GDP in FY23 and expected to gradually narrow over the medium term as revenue mobilization measures take hold, particularly GST harmonization and personal income tax reform. —APP