Islamabad: The Pakistan government's debt jumped by PKR 4 trillion or around 7.7 per cent in January 2023 to reach close to PKR 55 trillion, the State Bank of Pakistan (SBP) data showed, Pakistan-based Dawn newspaper reported.

The figure was PKR 42.39 trillion in January 2022, which means it has increased by 30 per cent over the past year.

Meanwhile, domestic debt rose to PKR 34.3 trillion by January end, 3.4 per cent higher than a month ago and around 25 per cent higher than the year-ago figure.

External debt stood at PKR 20.69 trillion, recording a jump of 15.7 per cent in a month and 38 per cent in a year, Dawn reported.

Pakistan is heavily dependent on borrowing. The SBP's data shows that during the first seven months (July to January) of the current fiscal year, the central government's domestic debt rose by PKR 3.218 trillion, an increase of 10.4 per cent.

The government's borrowings through long-term, high-cost Pakistan Investment Bonds (PIBs) reached PKR 20.9 trillion by the end of January from PKR 15.59 trillion a year ago, recording an increase of 34 per cent.

The long-term, high-yielding borrowing has already cost heavily to the government, eroding most of the development expenditure, according to Dawn.

By the end of June 2023, Pakistan's interest-to-revenue ratio, which was the worst in the region (just behind Sri Lanka) at 42 per cent, will balloon up to 54 per cent. It means interest rate payments will rise from PKR 4 trillion to PKR 5.4 trillion.

The recent increase of 300 basis points in the SBP's policy interest rate will also hit the government's spending capacity on development and other basic requirements. The central government's external debt increased more aggressively during the year through January 2023, rising by 38 per cent. During the current fiscal year up to January, the external debt increased by 23.5 per cent, or Rs 3.939 trillion, according to Dawn.

The external debt, due to the rupee's devaluation, has increased at a much higher pace and will increase significantly over the next month.

The government uncapped the exchange rate last month, after which the dollar jumped by about 20 per cent, which means the government will have to arrange this additional money for external debt servicing.

The SBP data also showed that the central government's total debt, including both the domestic and external debt, increased by 15 per cent (Rs 7.158 trillion) during July-January, according to Dawn.

The Dawn recently reported that Pakistan's external debt servicing rose by 70 per cent in the first two quarters of 2022-23, worsening the shortage of dollars.

In the first half of the fiscal year, Pakistan paid USD 10.21 billion in external debt servicing while in the same period of 2021-22, the country paid USD 6 billion, State Bank of Pakistan's (SBP) data showed.