Islamabad, The caretaker government of Pakistan has adopted a prudent approach to debt management, resulting in a marked decrease in borrowing levels compared to the previous administration. This strategy focused on fiscal consolidation, including measures for revenue mobilization and expenditure rationalization, significantly improving the country’s debt profile.

According to Ministry of Information and Broadcasting, a finance ministry report comparing the public debt strategies highlighted the careful management operations undertaken by the caretaker government. Notably, there was a 67 percent reduction in borrowing through government securities during the caretaker government’s term, with a concerted effort to meet debt repayment obligations for principal and interest expenses without accruing additional liabilities.

The report elaborated on the strategic shifts made in debt management, including the extension of government securities’ maturity, securing debt at margins below the policy rate, and engaging non-bank and retail investors through the capital market. This approach aimed at reducing dependency on borrowing from government securities through the banking sector.

Significantly, the caretaker government retired short-term Treasury Bills worth 1.6 trillion rupees, a reduction from the 3.3 trillion raised in the preceding period, thus lowering the government’s gross financing needs. Domestic borrowing was redirected towards long-term debt securities to finance the fiscal deficit, with major borrowings coming from floating rate securities at rates 3 to 4 percent below the policy rate. As a result, the average time to maturity of domestic debt was extended to around three years by the end of January 2024.

Additionally, the share of external debt in the total public debt was reduced from 38.3 percent at the end of June 2023 to 36.7 percent by the end of December 2023, diminishing the foreign currency risk in line with the Medium-Term Debt Management Strategy (MTDS) goals. The net external debt inflows during the caretaker government’s tenure were approximately 0.3 billion dollars, lower than in the previous period, with no expensive external borrowings raised from commercial banks and international capital markets.

This cautious approach to debt management by the caretaker government represents a significant step towards ensuring fiscal stability and reducing Pakistan’s debt vulnerability.