47. Pakistan Economic Survey 2011-12 - Consultancy Services in ...

Public Debt(introduced in 1997). The share of 3 months, 6months and 12 months maturity in total T-Billsportfolio is 9 percent, 20 percent and 71 percentrespectively as at end-Mar 2012. In order to raiseshort term liquidity, the government borrows fromthe domestic banks through auction in the form ofTreasury Bills. The auction of Treasury bills isarranged by the State Bank of Pakistan (SBP)twice a month. Treasury Bills having maturity of 6months are also created by SBP on average rate ofinterest of previous auction on need basis.Floating Debt share in overall public debt anddomestic debt stood at 32.7 percent and 54.5percent respectively as at end-March 2012. DuringJuly-March, 2012, the floating debt grew by Rs.691.5 billion or 21.4 percent. Around 58 percent ofthe total increase in government domestic debtstock was contributed by floating debt instrumentsduring July-March, 2012.Much of the proceeds accrued through MarketTreasury Bills (MTBs) as Rs. 576.4 billion wasadded to the stock of June 30, 2011. On the otherhand, government borrowed Rs. 167.3 billion byissuing Market Related Treasury Bills (MRTBs) toSBP.III. Unfunded DebtUnfunded Debt made up of the various instrumentsavailable under the National Savings Scheme(NSS). A number of different schemes are offeredunder NSS in the investment horizon of 3 years to10 years. The total share of unfunded debt in thegovernment’s domestic debt stood at Rs. 1,725.4billion or 23.9 percent on end-March 2012. Thestock of unfunded debt increased by Rs. 69.6billion or 4.2 percent compared with fiscal year2011. Net receipts in Regular Income Scheme wereup by 17.2 percent in July-March, 2012, as thestock increased from Rs. 182.6 billion in June,2011 to Rs. 214 billion at end-March 2011. SpecialNSS Schemes including Bahbood SavingsCertificates and Pensioner’s Benefits Accountsregistered a combined nominal increase of Rs. 49.3billion compared to Rs. 59 billion during July-March 2011. Rates of return on NSS instrumentswere revised downward in October 2011 andJanuary 2012 in response to the decrease in thebenchmark discount rate.9.3.2 Duration of Domestic DebtAs at end March 2012, duration of domestic debtstood at 2 years excluding SBP Market RelatedTreasury Bills (MRTBs). Duration includingMRTBs stood at 1.61 years. This estimate ofduration may be a little inconsistent owing to thenon-availability of actual maturity profile of NSSand manual operations of Central Directorate ofNational Savings (CDNS). A behavioral analysiswas undertaken to estimate the maturity of NSSinstruments. Generally, across the globe,governments desire to incur the lowest annual debtservicing cost while ignoring portfolio risks. It isimportant for the government to take necessarymeasures to lengthen the maturity profile ofdomestic debt. Though this may result in additionaldebt servicing cost in the short term, it wouldcertainly help in reducing the associated liquidityand refinancing risks in the domestic debtportfolio.9.4 External Debt and LiabilitiesPakistan’s external debt and liabilities (EDL)include all foreign currency debt contracted by thepublic and private sector, as well as foreignexchange liabilities of the State Bank. EDL hasbeen dominated by Public and PublicallyGuaranteed Debt having share of 76 percent owingto current account deficit which is financedthrough loans from multilateral and bilateraldonors. Debt obligations of the private sector arefairly limited and have been a minor proportion ofEDL (6 percent). Borrowing from IMF contributed13 percent in EDL Stock which was intended forBalance of Payment (BoP) support and is reflectedin foreign currency reserves of the country. Theexplicit concessional terms of loans (low cost andlong tenors) contracted with international financialinstitutions or donor countries have concealed theinherent capital loss associated with foreigncurrency debt to some extent. However, theanalysis of currency movement of last 20 yearsreveals that cost of foreign currency borrowingadjusted for exchange rates movement has been 1.5percent lower than the average domestic interestrates.Pakistan External Debt and Liabilities (EDL) stockwas recorded at $60.3 billion as of March 2012.During July-March 2012, $179 million was added131