Interest payments of Rs 428 billion went to domestic debts and Rs 45 billion payment was on account of foreign debt, while Rs 166.7 billion was paid to retire the maturing foreign currency debt. According to Finance Ministry fstatistics, almost 46 percent of government revenue had been used for interest and principal payments on public debt during July 2009 to March 2010.
A further break up shows that debt servicing cost of permanent debt rose sharply and mounted to Rs 57 billion in July-March as compared to Rs 40 billion in same period of previous fiscal year. Current increase was largely due to interest payment on 10-year Pakistan Investment Bonds (PIBs). Interest payment on floating debt registered a decline of 7.1 percent to Rs 160.7 billion.
This slowdown in servicing on floating debt largely came from reduced interest payments on Market Related Treasury Bills (MRTBS), as government was able to retire substantial amount in the initial period of current fiscal year. However, increased reliance on commercial banks' financing by the government through T-bills can boost the interest payments on floating debt in the remaining months of current fiscal year.
The interest payments on unfunded debt stood at Rs 210.0 billion during July-March of current fiscal year compared to Rs 202.1 billion in the same period last year. The disaggregation of data reveals that the interest payments on Behbood Saving Certificates, Special Saving Certificates and Pensioners Benefit Accounts increased significantly during the period.
It may be mentioned here that government budgetary financing from domestic sources stood at Rs 535.3 billion during July-March FY10 compared to Rs 321.2 billion in the same period a year earlier. Apart from showing a rise in fiscal deficit, the sharp increase in financing from domestic sources was due to the shortfall in financing from external sources. Within domestic sources of budgetary finance, non-bank contribution witnessed a strong expansion with its share in the total domestic source of financing jumping to 60.6 percent in July-March FY10 from 44.7 percent in the same period last year.