Search
Close this search box.

Caretaker govt implements cautious approach to managing debt

The caretaker government has implemented a cautious approach to managing debt, resulting in significantly reduced borrowing levels compared to the previous period. According to a brief report shared by the finance ministry comparing the public debt strategy of the caretaker government with 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. The caretaker government focused primarily on fiscal consolidation measures including revenue mobilization and expenditure rationalization. Over a short stint, with careful debt management operations, caretaker government 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 finance ministry revealed that the borrowing th rough government securities fell by 67 percent in the caretaker government's term as compared to the preceding period. The Finance Ministry's report further highlights that the caretaker government successfully retired short-term Treasury Bills amounting to 1.6 trillion rupees, contrasting with around 3.3 trillion raised in the preceding period. This helped in reducing the gross financing needs of the government. The 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. Resultantly, the average time to maturity of domestic debt has increased to around three years by the end of January 2024. By the end of June 2023, share of external debt in total public debt was 38.3 percent which reduced to 36.7 percent by the end of December 2023. This helped to reduce the foreign currency risk of the total public debt in-line with the targets defined in the Medium-Term Debt Management Strategy. During caretaker government, the net external debt inflows were around 0.3 billion dollars which is lower as compared to preceding period. Furthermore, no expensive external borrowing was raised from commercial banks and international capital markets. Source: Radio Pakistan

Search Keywords

Search