External debt/liabilities rise to $58.4 billion

External debt and liabilities (EDL) increased to $58.4 billion during first three months (July-September 2010) of the on-going fiscal year--an alarm for the economic managers, according to Pakistan Debt Policy Statement 2010-11.
A rise of $2.8 billion in the first quarter of the year at a time when IMF inflows dried up has been at the back of translational loss (USD vs other foreign currencies), meaning thereby that slow moving inflows govern the outstanding EDL stock.
On the other hand, Public and Publicly Guaranteed (PPG) debt stood at $44.9 billion as of end September 2010 consequent to addition of $1 billion and $884 million in respect of multilateral and Paris Club debt. The Bank of China deposits witnessed another $100 million repayment in the first quarter of 2010-11.
The IMF authorities, in support of the government's effort to deal with the floods calamity early in the fiscal year, provided the Emergency Natural Disaster Assistance (ENDA) facility and immediately disbursed the approved amount of Special Drawing Rights (SDR) 296.98 million ($451 million).
The fifth review could not be completed as Pakistan was not able to deliver on certain prerequisites and therefore no tranche of the remaining two under the IMF-SBA was released. As a result, the stock of IMF debt was elevated by 10.3 percent to end the first quarter at $8.9 billion. This BoP support programme had recently been extended to end September 2011, so that the government would get ample time to implement certain crucial fiscal reforms as mutually agreed.
Pakistan's External Debt and Liabilities stock was recorded at $55.6 billion as of June 30, 2010. During 2009-10, $3.3 billion was added to the stock, resulting in a growth of 6.3 percent. This increase in EDL was the lowest since FY 2007-08 as the EDL experienced an expansion of 14.5 percent and 13.4 percent in FY 2008 and FY 2009 respectively.
According to Debt Policy Statement 2010-11, a falling current deficit, low foreign currency debt creating flows and appreciation of dollar against other foreign currencies were the main factors associated with a muted growth witnessed in EDL for 2009-10. As most of the external loans are project-based, limited capacity to deliver on these projects has resulted in unutilised lending as far as existing commitments are concerned. Hence, disbursements under the IMF-SBA dominated the external debt creating inflows throughout the year, whereas other heads underwent minor additions/subtractions. As a percentage of GDP in dollar terms, the EDL was down by 50 bps in 2009-10 compared to 2008-09 approximately 31.8 percent.
Similarly, PPG debt was $43.1 billion at end June 2010, up by only $502 million against FY 2008-09. This low growth of 1.2 percent restrained the overall increase in the stock of EDL as opposed to a healthy augmentation of 4.7 percent to PPG debt during 2008-09. Nonetheless, the PPG debt still accounts for a major portion of EDL, amounting to 77.4 percent, for 2009-10, although the share plummeted by 3.9 percentage points in comparison to 2008-09.
An increase of $647 million in the multilateral debt was nullified by the repayment of $600 million International Sukuk Bond. Moreover, a $200 million Saudi Fund for Development (SFD) was acquired in 2009-10 and the local currency bonds of public sector (that are being captured from the last quarter of FY 2006-07) amounted to $64 million. US $100 million worth of NBP/Bank of China deposits was repaid in FY 2009-10.
The short-term debt granted by Islamic Development Bank (IDB) aggregated to $793 million as of June 30, 2010, an increase of $141 million in comparison to end June 2009. The stock of publicly guaranteed debt rested at $159 million at the end of FY 2009-10, mainly emanating from a $75 million facility issued to Wapda/Pepco during the year.