Pakistan's external debt servicing stood at $2.169 billion during first quarter (July-September) of ongoing financial year, according to Pakistan Debt Policy Statement 2010-11. During July-September 2010, Pakistan's servicing on external debt was recorded at $2.169 billion. Out of the grand total, principal repayments were $1.436 billion and interest payments were $233 million.
During the first quarter of 2010-11 the roll-overs of Pakistan reached $500 million while over the last two years; the debt servicing levels increased notably. Notwithstanding the Stand- by Arrangements (SBA) of the International Monetary Fund (IMF) repayments set to initiate in the second half of 2011-12, the servicing will increase to much higher levels.
The report shows that during 2009-10 a narrowing current account deficit was the main driver behind an ease in the external account of the country. The position of the Bank of Punjab (BOP) greatly benefited from declining international commodity and oil prices coupled with a slump in domestic demand.
The report says that imports decelerated sharply and exports posted a positive growth. Additionally, sustained robust workers' remittances were a positive input to current account balances, notwithstanding the recessionary trend in countries that contributed a major portion to this head. As a result, the current account deficit reduced from 5.7 percent of GDP in 2009 to 2.3 percent of GDP in 2010, the lowest in the last five years.
It is clearly indicated in the report that exports of Pakistan regained their lost momentum, to some extent, by posting a growth of 2.9 percent during 2010, in contrast to a contradiction of 6.4 percent in 2008-09. Similarly, the import growth was slightly down by 1.7 percent in 2009-10 against a large reduction of 10.3 percent the previous year.
On the other hand, financial account weakened marginally but a significant decline in current account deficit led the overall external position to register a surplus in 2009-10--after a gap of two years. The report says that the funds from IMF and disbursements from other donor agencies were the underlying factors. On top of it, shifting of liquidity management in respect of oil purchases from SBP to the interbank market increased the demand for US dollars and resultantly the domestic currency was depreciated by 5 percent during 2009-10.
The State Bank of Pakistan has already warned that the total debt and liabilities services increased to one trillion rupees in 2009-10. It is really pathetic that Pakistan, an underdeveloped country that is already under the pressure of high inflation for the last four years, has continuously been spending most of its revenue on debt servicing.
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