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Monday June 17, 2024

Pakistan to repay around $3bn in next quarter

By Mehtab Haider
March 23, 2023
A vendor at an exchange company counts dollars in this undated photograph. — AFP/File
A vendor at an exchange company counts dollars in this undated photograph. — AFP/File

ISLAMABAD: As foreign exchange reserves held by the State Bank of Pakistan (SBP) dwindle, the country’s external debt servicing requirements for repaying principal and mark-up in dollar amounts will be standing at approximately $3 billion in the last quarter (April-June) period of the current fiscal year.

In a relevant important development, Pakistani authorities confirmed that China has granted its assent for the rollover of SAFE deposits of $2 billion. “Yes,” was a brief response from a top official of the Finance Ministry when asked to comment on granting of assent by the Chinese side on the rollover of $2 billion deposits, which are scheduled to mature today (Thursday).

At a time when the foreign exchange reserves held by the SBP stood at $4.3 billion on March 10, 2023, Pakistan would have to repay its external debt obligations to the tune of $3 billion in the last quarter (April-June) period of the current fiscal year. Pakistani authorities will have to devise a plan B in case the IMF continues dillydallying tactics for striking a staff level agreement. When contacted, a top official of Finance Ministry said, “We would devise a Plan B if Plan A does not work. The Plan A is reviving the IMF programme.”

According to details available with The News, Pakistan would have to repay in shape of principal and mark-up amounts of $316 million in April 2023. This external debt repayment amount would increase up to $753 million in May 2023. In June 2023, the total external debt servicing requirements will jump up to $1.894 billion.

This external debt servicing requirement does not include IMF’s repayments. However, the official sources said that these were tentative numbers of external debt repayments which might vary due to exchange rate movements.

Pakistan has been experiencing a double edged sword as on the one side, the country would have to repay $23 billion external debt servicing, including rollovers, and on other hand, the capability of fetching dollars in shape of foreign loans also shrank significantly. Pakistan’s total external debt servicing requirements stood at $23 billion for the current fiscal year. In the ongoing quarter (Jan-March) period of the current fiscal year, the total debt servicing requirements on external front were estimated at $5.462 billion.

It includes principal repayment amounts of $5.03 billion such as repayments of $761.1 million and second amount of $874.73 million, totaling the principal amount going up to $1.635 billion. There are another two repayments in the shape of principal amount to the tune of $1.4 billion and another $2 billion as Chinese SAFE deposits. In the shape of interest repayments on external front, it stood at $428.88 million including $147.38 million, $189.15 million totaling the amount of $336.5 million. There are two other mark-up repayments of $72.19 million and $18.16 million, so the total mark-up amounts would climb to $426.88 million.

There is another challenge as the country’s capability to generate dollar inflows in shape of loans slashed significantly as Islamabad could only secure only $7.4 billion in first eight months (July-Feb) period of the current fiscal year against over $12 billion in the same period of the last financial year, registering a decline by over 39 percent.