Economic Meltdown Coupled With Mounting Debt

Economic Meltdown Coupled With Mounting Debt
That which is titled “Public debt (Gross),” and also commonly known as Sovereign Debt, is the result of a country’s accumulated budget deficits (i.e. expenditure minus revenue) and the effects of a devaluation of its national currency.

As per the Fiscal Responsibility and Debt Limitation Act (FRDLA), the “Total Debt of the Government” is the Gross Public Debt, both external and domestic, of the Federal and Provincial Governments together with the debt owed to the IMF, less the Government Deposits with the banking system, serviced and paid back out of the Federal Consolidated Fund (FCF) account maintained with State Bank of Pakistan (SBP).

Gross Public Debt and Total Debt of the Government:

Gross Public Debt in Musharraf’s era (1999-2008) increased by 97% to Rs 5,800 billion, in the PPP’s tenure (2008-2013) by 146% to Rs 14,291 billion and in the PML-N’s tenure (2013-2018) by 75% to Rs 24,952 billion. However, there were government deposits of Rs 1,901 billion with the banking system in June 2018 and after these are deducted as per the above-mentioned FRDLA from the Gross Public Debt of Rs 24,952 billion, the ‘Total Debt of the Government’ stood at Rs 23,024 billion or 67% of the GDP.

The PTI government increased public debt from Rs 25 trillion in June 2018 to Rs 41.5 trillion by September this year: an addition of Rs 16.5 trillion during the PTI’s 39-month tenure so far. This indicates an increase of 66 percent in public debt from June 2018 to September 2021. The PML-N’s total increase in public debt during its five years (2013-18) was Rs 10.7 trillion.

Break up of the increase of Rs 16.5 trillion in Public Debt:

Domestic debt swelled by Rs 10 trillion (from 16.4 trillion to 26.4 trillion), External Debt increased by Rs 6 trillion (from 7.8 trillion to 13.8 trillion) and the IMF figure rose by Rs 0.5 trillion (from 0.7 trillion to 1.2 trillion).

External debt, which is part of public debt as explained above, in US dollars has increased from $ 75.3 billion in June 2018 to $ 99.7 billion in September 2021. External annual debt servicing in dollars has increased from $ 7.5 billion to $ 13.4 billion, registering an increase of 79 percent.
As per the World Bank’s report “Finding the Tipping Point - When Sovereign Debt Turns Bad”, it is a serious situation when a country’s debt reaches 77 percent of its GDP

Total Debt and Liabilities:

Adding to the Gross Public Debt, the liabilities relating to private sector’s external debt, PSE’s debt, commodity operations’ borrowing and inter-company external debt from direct investors abroad is known in Pakistan as “Total Debt and Liabilities.” The liabilities so added are neither the responsibility or liability of the Federal Government nor payable out of its FCF account maintained with the SBP.

Now, the total debt and liabilities figure being higher – though part of it is not the government’s liability – has been a favourite talking-point for Imran Khan’s unique politics. While in opposition, he always quoted this number, both domestically and abroad, and continued doing so after assuming the office of PM in 2018.

During the PML-N’s five-year tenure (2013-18), total debt and liabilities increased by Rs 13,541 billion from Rs 16,338 billion to Rs 29,879 billion. As per the latest figures released by SBP, same has ballooned to Rs 50,484 billion with an unprecedented increase of Rs 20,605 billion or 69 percent in the PTI’s mere 39 months up to September 2021.

Total debt and liabilities in the preceding paragraph include total external debt and liabilities which in US dollars increased from $ 95.2 billion in June 2018 to $ 127 billion in September 2021; an increase of $ 31.8 billion during the PTI’s 39-month tenure so far.

However, loans/deposits taken by the PTI government from Saudi Arabia, UAE, Qatar and China (including swaps) are not included in the total external debt liabilities, as the same have been directly booked/parked in the balance sheet of the SBP – which, indeed, is a departure from the previous standard practice.


All over the world, public debt is discussed with reference to it as a percentage of the GDP of the country – which makes the figure more meaningful and relevant in the economy’s context. The Public-Debt-to-GDP ratio of Pakistan in June 2018 was 72 percent.

Despite political instability created in the country through the sponsored Dawn Leaks and Panama dramas in 2016-17, the ratio of gross public debt to GDP increased by 8 percent to 72 percent during the PML-N tenure (2013-18) and the GDP growth by 54% from Rs 22,386 billion to Rs 34,397 billion in the same period.

As per the World Bank’s report “Finding the Tipping Point - When Sovereign Debt Turns Bad”, it is a serious situation when a country’s debt reaches 77 percent of its GDP.

The Imran Khan government has already taken the public-debt-to-GDP ratio to 77 percent by September 2021, which was 72 percent in June 2018.
This is a crisis over which his government neither has any control nor the will to resolve it. There is certainly a lack of appropriate economic policies or any roadmap to deal with it

Per-capita Public Debt:

Per Capita public debt was Rs 144,000 in June 2018, which has increased to Rs 235,000 by September 2021, an addition of Rs 91,000 or 63 percent per capita during the PTI’s tenure.

Daily increase in Public Debt:

The average daily increase in public debt during the PML-N’s five years (2013-18) was Rs 5.8 billion as compared to the PTI’s daily increase of Rs 13.9 billion per day during its 39 months in power up to September 2021. This is 240 percent of the PML-N’s daily average!

Public Pledge and delivery:

Imran Khan had been very critical of the economic policies followed by the previous PPP and PML-N governments, particularly the rising Public Debt. Reiterating his earlier criticism on this subject in February 2019, he promised again to the public at large that his government would bring down the total debt and liabilities by Rs 10,000 billion. Just a day before the release by the SBP of the latest public debt figures in the last week of November 2021, he described the increasing debt as a “national security issue.”

Sadly, having created globally a bad image of Pakistan with reference to its public debt, the Imran Khan government’s performance or delivery is totally opposite to his promises. His government, instead of reversing – or at least halting – the increase, has already added over Rs 20,600 billion to the total debt and liabilities of Pakistan in 39 months of governance.

Unfortunately, having miserably failed so far in achieving the national revenue targets and controlling the hike in public expenditure coupled with a massive devaluation of the Pakistani rupee, the Imran Khan government has landed the country into a severe debt crisis. And this is a crisis over which his government neither has any control nor the will to resolve it. There is certainly a lack of appropriate economic policies or any roadmap to deal with it. This doomed performance on public debt is in line with the overall failure of this government to manage the country’s economy, foreign policy and security-related issues.


The economy has been driven into the ground by the government in last three years despite mounting public debt; inflation, poverty and unemployment numbers have touched new peaks and the sufferings of the people are painful indeed. The PTI’s incompetence, misgovernance, bad performance, anti-public attitude and failed economic policies are quite visible by now to the nation and the whole world.

The author, a UK fellow chartered accountant, is a former finance minister of Pakistan and former leader of opposition in the Senate of Pakistan