Managing the Public Finances Chapter 16: Managing the Public Finances The worrying state of public finances is aptly reflected by the accumulation of Central Government Debt, as shown in Table 16.1. The Fiscal Responsibility and Debt Limitation Act of 2005 placed a limit on the size of the government debt at 60 percent of the GDP. As of June 2022, it was Rs 47.8 trillion, equivalent to 71.4 percent of the rebased GDP. In the absence of the recent rebasing of the GDP, it would have been as high as 83 percent. Table 16.1: Trend in Central Government Debt DOMESTIC DEBT EXTERNAL DEBT Level% of GDP Level% of GDP 2009-10 4653 29.2 3789 23.8 2010-11 6014 30.4 4159 21.0 2011-12 7637 34.9 4544 20.8 2012-13 9520 38.7 4487 18.2 2013-14 10906 39.1 4877 17.5 2014-15 12192 39.8 4775 15.6 2015-16 13626 41.6 5417 16.6 2016-17 14849 41.8 5919 16.6 2017-18 16416 41.9 7795 19.9 2018-19 20732 47.3 11055 25.2 2019-20 23282 49.0 11824 24.9 2020-21 26265 47.1 12439 22.2 2021-22 31036 46.4 16746 25.0 Source: SBP (Rs in Billion) TOTAL DEBT Level% of GDP 8442 53.0 10173 51.4 12181 55.7 14007 56.9 15783 56.6 16967 55.4 19043 58.2 20768 58.4 24212 61.8 31787 72.2 35107 73.9 38704 69.3 47782 71.4 The share of relatively high-cost domestic debt has increased from 55 percent to 65 percent, while that of external debt has declined from 45 percent to 35 percent. The annual cost of debt servicing has risen from 2.8 percent of the GDP to 4.8 percent of the GDP, due also to a rise in the average interest rate. This has not only implied a higher budget deficit but has also led to a squeezing out of development spending, with the inevitable impact on GDP growth. 157