Pakistan to make loan repayment of $2.575b during May-June

ISLAMABAD: Amid ongoing toughest talks with the IMF to secure fresh bailout package of $6.4 billion, Pakistan will have to make loan repayment in shape of both principal and interest payments of $2.575 billion to international lenders during the last two months (May-June) period of the current financial year 2018-19.

Keeping in view dwindling foreign currency reserves and requirement of total loan repayment to the tune of $27 billion over next two years estimated by the IMF, all this has weakened the negotiating position of Pakistan with the IMF at a time when the Fund’s staff member is going to assume charge as Governor State Bank of Pakistan in days to come.

As far as repayment of foreign loans is concerned, out of total repayment obligation of $2.575 billion, the major repayment in May and June 2019 would be on account of short-term commercial loans in the range of $1.647 billion. “Alone in ongoing month (May 2019), the commercial loan repayment is due to the tune of $840 million,” official data available with The News reveals.

This correspondent visited to the office of newly appointed Director General Debt Office Abdul Rehman Warriach twice to get his viewpoint regarding increasing burden of public debt and liabilities and government’s strategy if any to reduce this increasing obligations but his staff said he was busy and could not meet every time.

Despite getting generous dollar inflows from friendly countries such as China, Saudi Arabia and UAE to the tune of $9 billion during the current fiscal year, the foreign currency reserves held by the State Bank of Pakistan stand at $8.8 billion on May 2, 2019 as it decreased by $219 billion alone in the reported week by the central bank.

China had so far provided $4 billion loan including $2 billion in shape of deposits and $2 billion as commercial loan, Saudi Arabia $3 billion as deposits and UAE $2 billion deposits with no possibility to provide remaining $1 billion committed amount during the current fiscal year. The Economic Affairs Division (EAD) reported that the country had received total disbursements of loans and grants to the tune of $5.8 billion during the first nine months of the current fiscal year.

With repayment requirements standing at $2.575 billion, it seems that the foreign currency reserves held by the SBP will further deplete if there will be no major inflows poured into kitty during the last two months of the current fiscal year.

On payment of commercial loans, Pakistan will have to repay $810 million as principal amount and $30 million as interest in May 2019. In June (2019), Islamabad will have to repay $767.04 million as principal amount and $40.26 million as interest on this commercial loan.

On account of loan repayment to Paris Club countries, Pakistan will have to pay back loan to Japan to the tune of $157.45 million in May 2019 and $194.46 million in June 2019.

The loan repayment to France, US and Germany stood at $78 million, $61 million and $45.02 million respectively in May 2019.