THE PROFILE OF DEBT STRUCTURE: MONETARY AND FISCAL POLICIES A Case of Pakistan (1971-2007)

This paper examines a complete profile of public debt structure for the past three decades in the context of the fiscal and external sector imbalances as the key determinants of public debt burden. Despite initiation of several reforms the stock of public debt, its growth and debt servicing remain to be high. Increase in debt is almost equally attributed to domestic and external debt and the structure of debt remain to be the same. Increased reliance on short term domestic debt from the central bank indicates the structure of debt is dominated by short-term debt. The rescheduling and restructuring of debt in the first half of 2000s had brought some relief in the external debt indicators. However, the rising fiscal and external accounts gap, in the second half of 2000s, has adversely affected the debt to GDP ratio and growth in external debt remains high. Obvious implication of growing debt stock is that the debt servicing cost would increase, fiscal adjustment would be difficult and debt sustainability indicators may deteriorate in the future.