PDM government obtained $8.4 billion foreign loans. Caretaker Government obtained foreign loans to the tune of $3.9 billion and paid back $3.6 billion

Caretaker govt releases comparison of the debt obtained during PDM govt from 1st Feb 2023 to 16th August 2023 & Caretaker Govt from 17th August 2023 to 31st Jan 2024

ISLAMABAD  (  Web News  )

Caretaker government released the comparison of the debt obtained during PDM government from 1st February 2023 to 16th August 2023 and Caretaker Government for 17th August 2023 to 31st January 2024.

According to the data release by the Ministry of Finance, PDM government obtained $8.4 billion foreign loans during their tenure, paid back $5.4 billion during their tenure and utilized $3 billion in their specific period. Caretaker Government obtained foreign loans to the tune of $3.9 billion and paid back $3.6 billion, leaving only $300 million for it’s utilization. PDM government borrowed 19,862 billion during it’s tenure and made repayment from it to the tune of Rs. 14,031 billion, leaving 5,831 billion for it’s use.

Caretaker Government obtained loans amounting to 19,8390 billion and made a debt servising of Rs.17,934 billion during it’s tenure leaving Rs. 1,896 billion for it’s use.

PDM government issued Treasury bills to the tune of 15,985 billion during it,s tenure and paid back Treasury bills to the tune of 12,678 billion, and only 3,307 billion were left for it’s use. Caretaker government issued treasury bills to the tune of 13,813 billion  and retired Rs,15,417 billion, during it’s tenure and it utilized only 1,604 billion out of it. PDM government issued Pakistan Investment Bond and Sukuk Bond to the tune of Rs.3,877 billion  and repaid 1,353 billion out of it, leaving 2,524 billion for it’s use.

Caretaker Government issued Pakistan Investment Bond and Sukuk Bond to the tune of Rs.3,877 billion  and repaid 1,353 billion out of it, leaving3, 500 billion for it’s use.

MOF official statement stated that borrowings in the caretaker government’s term have been lower as compared to the preceding period. Bulk of the borrowings raised in the last few months was to meet debt repayment obligations including principal and interest expense liabilities as caretaker government focused primarily on fiscal consolidation measures including revenue mobilization and expenditure rationalization. Below is a comparison of the caretaker government versus preceding period public debt strategy.

Debt comparison of preceding period from February 1, 2023 to 16 August 2023 and caretaker government period started from August 17 2023 and still in progress by 31 January 2024. The caretaker government inherited a policy rate of 22 percent, which is highest ever since 1972. The average policy rate during preceding period was almost 19.5%.

Over a short stint, with careful debt management operations, caretaker government has managed to improve domestic debt profile by extending maturity of government securities; raising debt on margin below the policy rate; and tapping non-bank and retail investors through capital market. Focus was on reducing borrowings from government securities through the banking sector. The borrowing through government securities fell by 67 percent in the caretaker government’s term as compared to the preceding period.

Caretaker government successfully retired short-term Treasury Bills amounting to Rs 1.6 trillion, contrasting with around Rs 3.3 trillion raised in the preceding period. This helped in reducing the gross financing needs of the government. Following table 2 describes the net borrowing from Treasury Bills. Caretaker government shifted its domestic borrowing to long-term debt securities for the financing of fiscal deficit. Out of medium to long term instruments, major borrowing remained from floating rate securities, while fixed rates instruments were borrowed on average at 3 to 4 percent below the policy rate during caretaker government period.

Resultantly, the average time to maturity of domestic debt has increased to around 3.0 years by the end Jan 2024 as compared to 2.8 years at the end of June 2023. This is in- line with the targets mentioned in the Medium-Term Debt Management Strategy (MTDS) FY23-FY26 and a step in the right direction to meet the end June 2024 target of 3.1 years. Table 3 below highlights the net borrowing from Pakistan Investment Bonds (PIBs) and Government Ijara Sukuk.

External Borrowing, side at end June 2023, share of external debt in total public debt was 38.3 percent which reduced to 36.7 percent at end December 2023. This helped to reduce the foreign currency risk of the total public debt in-line with the targets defined in the MTDS FY23- FY26. During caretaker government, the net external debt inflows were around US$ 0.3 billion, which is lower as compared to the preceding period. Furthermore, no expensive external borrowing was raised from commercial banks and international capital markets during caretaker government. It is critical to pursue prudent debt management backed by reducing sovereign-bank nexus to avoid overburdening banks with public sector debt, while reducing private sector crowding out.