Pakistan's domestic debt increased 11 percent to Rs 4.292 trillion in the period of seven months from June last year to January 2010, as the government went on to issue bonds and treasury bills to bridge the financial deficit.

Moreover, almost Rs 258 billion were added to the domestic debt stock with new t-bill auctions in backdrop of the government's increasing war-related expenditure. The domestic debt numbers issued by the State Bank of Pakistan do not include government-guaranteed debt which different public entities have accumulated.

Last year, the government had issued Rs 175 billion of Term Finance Certificates (TFCs) twice to settle intra-corporate circular debt.

While talking to reporters, an economist, Kaiser Bangali said, "During times of war, you can not stop military spending. Things would have been better if assistance as promised by the international community had been received."

Further, he said that the failure to raise sufficient revenues from taxes was also a reason behind increase in domestic debt.