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December 5, 2018

Foreign debt up 13pc in July-Sept to $96.735 billion


December 5, 2018

KARACHI: Pakistan’s outstanding foreign debt and liabilities rose 13 percent in the first quarter of the 2018/19 fiscal year to $96.735 billion, the central bank data showed on Tuesday.

The external debt and liabilities (EDL) came at $85.623 billion at the end of September last year. It stood at 95.342 billion in the previous quarter ended June 30, 2018. The debt and liabilities made up 31.2 percent of the country’s gross domestic product in the period under review.

Most of this increase stemmed from the public external debt, which surged 14 percent to $76.340 billion.

The current account deficit, however, narrowed in the first quarter of the current fiscal year of 2019. The current account deficit stood at $4.840 billion during July-October FY19, compared with $5.072 billion in the same period last year.

Higher financing in the form of borrowing from Chinese disbursements, bilateral and commercial loans and the Eurobond/Sukuk proceeds added to the country’s foreign debt.

The State Bank of Pakistan’s (SBP) data showed that long-term foreign debt stood at $64 billion at end-September, up from $56.3 billion at the end of the same quarter last year.

Sukuk and Eurobonds’ debt obligations increased to $7.300 billion from $4.800 billion in the corresponding period of last fiscal year. Debt accumulated through commercial loans stood at $5.962 billion, compared with $4.687 billion in preceding year.

Debt obtained through the International Monetary Fund (IMF) was $6.209 billion in the period under review. Loans from multilateral donors remained almost flat at $28 billion.

The figures furthers revealed that the country’s external debt servicing fell to $2.452 billion in the first quarter from $7.490 billion a year ago. The decline in the external debt servicing was due to slowdown in principle and interest repayments. The SBP sees servicing of the external public debt is likely to increase in coming years as the repayment of rescheduled Paris Club debt and IMF’s EFF has started to increase from FY19 onwards.

Moreover, the commercial loans and 5-year sovereign bonds issued in FY14 and FY15 would be maturing in FY19 and FY20.

The SBP’s foreign reserves fell to $7.602 billion in October from $13.491 billion in the same month last year. The recent currency devaluation would have negative implications for the public debt.

Analysts estimate that around Rs300 billion will add to the foreign debt due to a latest major depreciation in the exchange rate.

They said the country is likely to secure an IMF bailout package next month to meet its $31 billion external financing requirements in the current fiscal year. The SBP’s annual report for fiscal year 20117/18 said the reliance on commercial and other bilateral (mainly China) sources have increased considerably during the last couple of years. Importantly, the government borrowing from commercial lenders is relatively at higher rates and of shorter tenor compared to multilateral/bilateral loans.

The assessment of external debt sustainability shows deterioration in debt bearing capacity of the country, but servicing capacity improved with the recovery in exports as well decline in debt servicing during the year, according to the central bank annual report.

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