Financing the fiscal and current account deficits we have discussed before leads to higher debt for the government. Growth of public debt in emerging economies has a dampening effect on growth. Both labor productivity and increase in capital stock is adversely affected as the government crowds out private investment. Additionally, with limited fiscal space, governments are unlikely to spend more on development. However, before commenting on whether or not Pakistan has a debt problem, we should understand what public debt in Pakistan looks like.

1. F O R C I R C U L AT I O N
Does Pakistan have a debt problem?
Macro Pakistani

2. 2
Since 2009, central government debt has ballooned to over PKR 35 trillion
Note: Excludes Year 1 of PPP; Debt excludes IMF support for BOP and other foreign liabilities
Source: SBP
PPP
PML-N
PTI

3. 3
Most borrowing by PML-N and PTI was done to finance debt servicing
Note: Debt excludes IMF support for BOP and other foreign liabilities
Source: SBP; Economic Survey 2019-20
PTI 2 years
PML-N 5 years

4. 4
Largest single increases in external borrowing can be attributed to devaluation
Note: Debt excludes IMF support for BOP and other foreign liabilities; Devaluation impact calculated by keeping Exchange rate constant from previous year
Source: SBP
PTI 2 years
PML-N 5 years

5. 5
~$37 billion of external debt will need to be repaid in the next 3 years
Note: Includes IMF support for BOP and other foreign liabilities
Source: IMF

6. 6
Pakistan’s public debt levels are in line with other emerging markets for now
Source: IMF