Debt to GDP ratio declines by 4.68pc in last fiscal year: Ministry

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The debt to gross domestic product (GDP) ratio decreased from 87.6 percent to 83.5 percent during the last fiscal year 2020-21 on a year-on-year basis.

According to a statement issued by the Ministry of Finance on Wednesday, the country’s total debt to Gross Domestic Product (GDP) ratio was 87.6 percent on June 30, 2020, which decreased to 83.5 percent on June 30, 2021, showing an improvement of 4.68 percent on a year-on-year basis.

The ministry while responding to some media reports said that both domestic and external debts have depicted a downward trend from last year. It said the domestic debt declined to 55.1 percent of GDP from 56 percent last year. Similarly, the external debt to GDP ratio receded to 28.5 percent from 31.6 percent last year.

The statement pertinently mentioned that the best way to evaluate debt trend was through debt to GDP measure. However, the statement clarified that the debt has increased in line with fiscal deficit.

Meanwhile, the government plans to raise debt worth Rs 5.87 trillion by offering sovereign securities to commercial banks over the next three months, according to the central bank.

The funds to be raised through the issuance of treasury bills and Pakistan Investment Bonds would be partially utilised to pay off the maturing debt of Rs 5.15 trillion. However, they will also add a net Rs 720 billion to the public debt portfolio in the three months from October to December 2021. The breakdown of the planned fresh borrowing suggests that the government will borrow Rs 5.05 trillion by issuing three to 12-month T-bills against maturing papers of Rs 5.1 trillion from October to December 2021.

Similarly, it will raise Rs 300 billion by floating three to 30-year Pakistan Investment Bonds at a fixed rate of return against the maturity of previously issued bonds worth Rs 55 billion during the three months. It will borrow an additional Rs 225 billion through the issuance of three to five-year PIBs at a floating (variable) interest rate against zero maturity as the floating rate bonds are relatively new.