PRESS RELEASE

Islamabad: February 22, 2024

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.

Time Frame
Preceding period 01st February 2023 to 16th August 2023
Caretaker government 17th August 2023 to 31st January 2024

DOMESTIC BORROWINGS

 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: (i) extending maturity of government
securities; (ii) raising debt on margin below the policy rate; and (iii) 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 as elucidated in table 1 below:

Table 1: Domestic Debt flows (GoP Securities) Rs in Billion

Period Inflow Outflow Netflow % Change
Preceding period 19,862 (14,031) 5,831
Caretaker government 19,830 (17,934) 1,896 -67%
Note: The inflows of domestic debt are in realized value terms

 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:
 Table 2: Treasury Bills (Rs in Billion)
Inflow Outflow Netflow
Preceding period 15,985 (12,678) 3,307
Caretaker government 13,813 (15,417) 1,604

 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:

Table 3: PIBs and Sukuk (Rs in Billion)

Inflow Outflow Netflow
Preceding period 3,877 (1,353) 2,524
Caretaker government 6,017 (2,517) 3,500

EXTERNAL BORROWINGS
 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.

 Table 4 indicates that during caretaker government, the net external debt inflows were
around US$ 0.3 bn, which is lower as compared to preceding period. Furthermore, no
expensive external borrowing was raised from commercial banks and international capital
markets during caretaker government.

Table 4: External Public Debt Flows (USD billion)

Period Inflow Outflow Netflow
Preceding period 8.4 (5.4) 3.0
Caretaker government 3.9 (3.6) 0.3
 Includes IMF Budgetary & Balance of Payment (BoP) inflows and outlows
 Excluding grants and bilateral rollover
 Outlows represent principal only
 Does not include UAE BoP deposit in July 2023.

 Besides fiscal & external current account sustainability and privatizing state-owned
companies, 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.
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