LAHORE: The Punjab government’s total debt portfolio declined by Rs34.8 billion, a drop of 2 percent, during the first quarter of the current Fiscal Year (FY) owing to a forex gain of Rs30.4 billion and a decline in net debt position amounting to Rs4.4 billion.
As per a report released by the Punjab Finance Ministry for the period between July 1, 2025, and September 30, 2025, at the end of the first quarter, the debt stock stood at Rs1,722.4 billion, out of which Rs1,721.2 billion is from external lenders and Rs1.2 billion is from domestic sources. These loans collectively are 2.5 percent of Punjab’s Gross State Domestic Product (GSDP).
The report observed that Punjab’s total debt stock declined from Rs1757.2 billion to Rs1722.4 billion in three months. The external loans witnessed a drop from Rs1,756 billion (reported in June 2025) to Rs1,721.2 billion. However, the domestic loans remained unchanged at Rs1.2 billion.
The report noted that the outstanding debt stock at end-September 2025 is exclusive of outstanding provincial guarantees (awarded to various Punjab government entities). The debt stock also excludes the outstanding amount of commodity debt, which currently stands at zero.
According to the report, the debt portfolio predominantly comprises borrowing from external sources with 99.9 percent coming from multilateral agencies and bilateral loans contracted mostly on concessional terms (low cost and longer tenor), procured for various development projects/programmes spread across the province and for reform support mainly, whereas only 0.1 percent of debt portfolio is domestic in nature borrowed from the Federal government.
Moreover, the report highlighted that the government’s external debt is derived mainly from three key sources, with around 58 percent coming from the World Bank (International Development Association and International Bank for Reconstruction and Development), 20 percent from the Asian Development Bank and 18 percent from China. In addition, 4 percent comes from other sources.
As per the report, the agriculture, irrigation and livestock sector remained the major recipient of government borrowing, as its share constitutes 24 percent of the total outstanding, followed by transport and communication 19 percent, education 19 percent, urban and community development at 17 percent, governance 11 percent, health 5 percent and others 5 percent.
Moreover, it pointed out that the government’s debt portfolio is dominated by foreign currency borrowings, with total exposure residing at 99.9 percent of the debt portfolio. Currency-wise exposure is denominated in the US dollar (66 percent), followed by Special Drawing Rights (24 percent), Japanese Yen (6 percent) and Chinese Yuan (2 percent).
Hence, the report noted, the government’s debt by its composition remains exposed to foreign exchange risk; owing to this, any change in parity of the dollar and other foreign currencies with the rupee has a pronounced impact on the valuation of Punjab’s debt portfolio when translated into rupee terms.
The report also noted that overall, a significant portion (73 percent) of the debt portfolio comprises loans contracted at fixed interest rates from multilateral institutions and is not exposed to changes in international interest rates. However, the floating rate portion (27 percent) remains subject to periodic revision of interest rates since these loans attract floating reference rates (i.e., SOFR, TONA, EURIBOR, etc).
Copyright media, 2025
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