Pakistan will not face an issue in meeting its external payment obligations in the current fiscal year (FY25), said State Bank of Pakistan (SBP) Governor Jameel Ahmad on Monday.
The remarks from the central bank chief came as the SBP held a press briefing after the Monetary Policy Committee (MPC) meeting.
The MPC reduced the key policy rate by 100 basis points, taking it to 19.5%, its second successive cut.
Answering a query on rollover of loans and potential re-profiling of debt, Ahmad said Pakistan needs to pay off $26.2 billion in external debt obligations in FY25.
“This includes roughly $4 billion in interest payments, whereas the remaining (over $22 billion) are principal payments,” he said.
“The good news is that debt to the tune of $3 billion has already been settled in July, which includes rollover of $2 billion and a repayment of $1.1 billion.
“Therefore, in the coming 11 months, we will need to repay $23 billion. This includes $3.7 in interest payment and over $20 billion in principal payment,” he shared.
The SBP governor said that during the previous fiscal, Pakistan made timely payments of its external debt obligations, including both interest and principal payments.
“Despite these payments, our external reserves have increased from $4.4 billion to $9.4 billion, which are quality reserves,” he said.
Further elaborating on the payment mechanism, Ahmad said off this $26 billion debt payment, $12.3 billion will be bilateral rollover. “Around $4 billion are commercial loans, which are also bilaterally arranged loans that will also rolled over.
“Thus, the remaining $10 billion is a repayable amount, out of this $1.1 billion has already been paid off in July,” he said.
“The important thing is that out our serviceable debt of nearly $9 billion for the current fiscal year is lower than our current foreign exchange reserves. Additionally, more inflows are expected.” he said.
He said that the capacity to service our foreign debt is completely available, “and we will not face any issue in debt servicing”.
As per SBPs latest data, foreign exchange reserves held by the SBP decreased by $397 million on a weekly basis, clocking in at $9.02 billion as of July 19.
Total liquid foreign reserves held by the country stood at $14.33 billion. Net foreign reserves held by commercial banks stood at $5.31 billion.
However, concerns over Pakistan’s external financing needs and debt sustainability have been raised by international ratings agencies as well as other analysts.
Pakistan has also initiated talks on reprofiling its power sector debt to China, alongside talks on structural reforms suggested by the International Monetary Fund (IMF), Finance Minister Muhammad Aurangzeb told a press conference on Sunday.
He said that Pakistan will address the reprofiling of Chinese credit to the power sector on a project-by-project basis and that Islamabad is looking to appoint a local advisor in China for the purpose.
The finance minister stressed that it is reprofiling and not restructuring of debt because there is no question of cutting the amount it owes. Reprofiling is generally understood to involve an agreed lengthening of the time needed to repay.
Pakistan is also in talks with Saudi Arabia, the United Arab Emirates, and China to meet gross financing needs under the IMF programme for which Islamabad needs board-level approval.
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