External debt and liabilities swell to $115.7 billion

KARACHI: Pakistan’s foreign debt and liabilities increased $3 billion or 2.6 percent during the six months period ended in December last, the central bank’s data showed on Wednesday

Till December, external debt and liabilities totaled $115.7 billion compared to $112.7 billion till June-end. Total external debt and liabilities were $110.7 billion till December 2019, according to the State Bank of Pakistan (SBP).

Economist Ashfaque Khan said external debt and liabilities (EDL) were increasing sharply even before the start of the coronavirus pandemic due to falling exports, sharp depreciation of exchange rate, tight monetary policy and a decline in non-debt creating inflows.

“However, COVID-19 has further intensified the country’s debt situation,” said Khan. “When Pakistan is in the IMF’s [International Monetary Fund] program, the debt accumulates rapidly.”

Khan, the principal and dean at the NUST School of Social Sciences, said external debt and liabilities are expected to reach $120 billion by the end of this fiscal year.

The State Bank’s data further showed that an expansion in the EDL occurred in public as well as private sectors. A major increase in the foreign debt came from the disbursements from multilateral donors and the bilateral creditors.

The public external debt amounted to $90.5 billion as of December 31, 2020 compared with $87.8 billion till end-June. This was recorded at $87.6 billion till December-end of 2019.

The government’s external debt rose to $74.8 billion in July-December FY2021 from $70.3 billion a year earlier.

Long-term foreign debt stood at $73.9 billion at December-end, up from $68.7 billion till June-end. It amounted to $68.1 billion a year earlier.

Debt accumulated through multilateral sources rose to $33.1 billion from $30.8 billion. Loans from bilateral sources stood at $14.6 billion, compared with $13.4 billion. IMF’s debt amounted to $7.4 billion as of December compared to $7.6 billion in June.

The SBP’s figures further showed that the servicing of external debt rose 1.1 percent to $3.5 billion in the second quarter of this fiscal year. The government paid $2.9 billion as principal amount whereas the remaining $617 million was paid as interest.

Pakistan secured a debt relief of $1.7 billion from the G-20 countries, together with the Paris Club creditors under the debt service suspension initiative, announced to provide a fiscal space to stressed economies hurt by the Covid-19 and lockdown.

The increase in the EDL may put pressure on the foreign exchange reserves. The central bank’s foreign exchange reserves decreased $82 million to $12.9 billion as of February 4 due to external debt repayments.