Pak domestic debt through financial instruments stands 61.5pc of GDP

Besides Pakistan's external debts surged to more than $57 billion, the government borrowing is consistent from public through commercial banks in the form of government papers and financial instruments as National Saving Scheme (NSS), standing an unbelievable level of 61.5 percent of the GDP.

According to statistics of State Bank of Pakistan, the country's public debt stock increased from Rs 17.8 trillion as on end-June 2015 to Rs 18.9 trillion by end-December 2015. The domestic debt expanded by Rs 687.1 billion in first half of 2015-16 compared to an increase of Rs 602.7 billion in the same period last year.

These debts mainly borrowed from scheduled banks as compared to central bank which the government promptly retired its loan in pursuance of its internal policy.

In the period during July to December 2015, borrowing made through T-Bills were recorded huge to stand at Rs 506 billion alone followed by Rs 240 billion of Pakistan Investment Bonds (PIBs). The Sukuk in the form of floating debts stand at Rs 202 billion. With inflation inching up in Q2-FY16, banks changed their interest rate outlook, and increased their participation in relatively shorter tenured government securities. A majority of commercial banks offered higher amounts in T-bills compared to PIBs during Q2FY16. Moreover, around half of the entire amount offered in T- bill auctions was concentrated in 3-month T-bills. On a cumulative basis, the government borrowed Rs 2.6 trillion from commercial banks in primary auctions during H1- FY16, largely in accordance with the target set for the period.

However, the bidding pattern of auctions held in Q2-FY16 shows that the government accepted Rs 1.1 trillion, which is lower than both the maturity and the target set for the quarter. In addition to substantial external inflows, other factors responsible for lower borrowing from commercial banks included successful conduct of Government Ijara Sukuk (GIS) auction in December 2015, which partially neutralized the GIS maturities falling during the quarter; and mobilization of Rs 208.5 billion through outright purchase of GIS on deferred payment basis in November 2015.

Besides, the government budgetary borrowing from the banking system (on cash basis) was Rs 183.3 in H1-FY16.

The fiscal authorities resorted to financing their deficit through borrowings from external resources and commercial banks. As a result, they were able to retire SBP debt of Rs 429.2 billion during the period. This shift in borrowing from SBP to commercial banks has enabled the government to meet the IMF targets for endSeptember and end-December 2015 set under the Extended Fund Facility, SBP quarterly report said.