Punjab’s government debt has seen a notable increase of 2 percent (Rs 32.6 billion) from the end of March 2024 to the end of June 2024. This rise is attributed to forex losses amounting to approximately Rs 8.1 billion and an increase in net debt position of Rs 24.5 billion during the last quarter of the fiscal year 2023-24, spanning from April to June 2024.
Debt Stock Overview
According to a recent report released by the Punjab Finance Ministry, the total debt stock of the Punjab government stood at Rs 1,677 billion at the end of June 2024. This figure includes Rs 1,675 billion in external loans and Rs 1.7 billion in domestic loans. The total debt represents 2.92 percent of Punjab’s Gross State Domestic Product (GSDP).
Debt Composition
| Debt Component | End-March 2024 (Rs billion) | End-June 2024 (Rs billion) | Change (Rs billion) | Percentage Change |
|---|---|---|---|---|
| Total Debt Stock | 1,644.5 | 1,677.1 | 32.6 | 2.0% |
| External Loans | 1,642.6 | 1,675.4 | 32.8 | 2.0% |
| Domestic Loans | 1.9 | 1.7 | -0.2 | -10.5% |
The report highlights that the increase in debt stock from Rs 1,644.5 billion to Rs 1,677.1 billion occurred despite a decrease in domestic loans. Domestic loans fell from Rs 1.9 billion in March 2024 to Rs 1.7 billion in June 2024. In contrast, external loans increased from Rs 1,642.6 billion to Rs 1,675.4 billion during the same period.
Debt Exclusions
The outstanding debt stock reported does not include provincial guarantees given to various Punjab government entities or commodity debt. Commodity debt, primarily secured by wheat stock procured by the government and backed by a Cash Credit Limit (CCL) from the Federal government, amounted to Rs 355 billion at the end of June 2024.
Debt Portfolio Breakdown
The Punjab government’s debt portfolio is heavily reliant on external sources. Here’s a detailed breakdown:
External Debt Sources
| Source | Percentage of Total External Debt |
|---|---|
| International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD) | 54% |
| China | 21% |
| Asian Development Bank (ADB) | 21% |
| Other Sources | 4% |
Debt Distribution by Sector
| Sector | Percentage of Total Borrowing |
|---|---|
| Agriculture, Irrigation, and Livestock | 25% |
| Transport and Communication | 22% |
| Education | 20% |
| Urban and Community Development | 15% |
| Governance | 10% |
| Health | 5% |
| Others | 3% |
Currency and Interest Rate Exposure
The report provides insights into the currency and interest rate exposure of Punjab’s debt portfolio:
Currency Exposure
| Currency | Percentage of Total Debt |
|---|---|
| US Dollar (USD) | 71% |
| Special Drawing Rights (SDR) | 21% |
| Japanese Yen (JPY) | 4.7% |
| Chinese Yuan (CNY) | 2.5% |
With 99.9 percent of the debt portfolio denominated in foreign currencies, Punjab’s debt remains exposed to foreign exchange risk. Fluctuations in the value of the rupee against major currencies like the USD, SDR, JPY, and CNY can significantly affect the valuation of the debt when translated into rupee terms.
Interest Rate Exposure
| Interest Rate Type | Percentage of Debt Portfolio |
|---|---|
| Fixed Interest Rates | 73% |
| Floating Interest Rates | 27% |
A substantial portion (73 percent) of the debt portfolio consists of loans with fixed interest rates, shielding them from fluctuations in international interest rates. Conversely, 27 percent of the debt portfolio is subject to floating interest rates, which are influenced by reference rates such as SOFR, TONA, and EURIBOR.
Leave a Comment