Foreign debt, liabilities increase 7pc to $113.8bln in Q1

KARACHI: Foreign debt and liabilities rose 7 percent year-on-year to $113.8 billion in the first quarter of the current fiscal year of 2020/21, the central bank’s data showed on Wednesday.

The State Bank of Pakistan’s (SBP) data showed that external debt and liabilities increased $6.7 billion from $107.1 billion in the same quarter of last fiscal year.

Foreign debt and liabilities rose $945 million or 0.8 percent from $112.8 billion by June-end.

The debt and liabilities made up 41.5 percent of the country’s gross domestic product at the end of September FY2021, marking a slight increase from 40.1 percent a year ago.

Analysts said repayments of debts put pressure on the foreign exchange reserves and the currency as well.

The increase in external borrowings and potential debt related outflows might have negative implications for the external accounts in times to come.

The State Bank’s data showed that an expansion in foreign debt and liabilities came from both the public and the private sectors. A major increase in the external debt was due to disbursements from multilateral donors and the International Monetary Fund.

The public external debt was worth $88.9 billion as of September 30 compared with $87.8 billion in the previous quarter. This was recorded at $84.5 billion till September-end.

The government’s debt rose to $72.3 billion in July-September FY2021 from $67.807 billion a year earlier.

Long-term foreign debt stood at $71.1 billion at end-September, up from $68.7 billion at the end of the previous quarter. It amounted to $66.2 billion at end-September last year. Debt accumulated through multilateral sources rose to $32.3 billion from $30.8 billion at end-June and $28 billion at end-September 2019.

Loans from bilateral sources stood at $14.4 billion compared with $12.7 billion in previous year. Debt taken through the International Monetary Fund was $7.6 billion as of September-end. It amounted to $6.3 billion a year earlier.

The SBP’s figures revealed that the servicing of external debt sharply fell to $3.5 billion in the first quarter of this fiscal year from $14.5 billion during the last fiscal year. The government paid $2.9 billion as principal amount whereas the remaining $659 million was paid as interest.

Pakistan received more than $2.7 billion in gross foreign loans in the first quarter of FY2021 on account of budget financing, project financing and balance of payments support.

The country’s external accounts showed improvement. The current account posted a surplus of $792 million or 1.2 percent of gross domestic product in three months to September compared with a deficit of $1.4 billion or 2.3 percent of GDP in the same period a year earlier.

The foreign exchange reserves stood at $18.8 billion as of June-end, and climbed to $19.3 billion by September-end.

The rupee became one of the best performing currencies last month in Asia as it took support from robust dollar inflows and successful transition of the exchange rate system to a flexible market-based system.

The central bank says the increase in the country’s and the SBP’s gross reserves was attained not on the back of higher net external borrowing of the government but instead due to the reserve building operations of the SBP during the first nine months of the last fiscal year before the impact of coronavirus lockdown.