External debt, liabilities hit historic high of $122bn

Updated 31 Aug 2021

KARACHI: Pakistan’s external debt and liabilities continued to grow and reached the historic level of $122 billion by the end of last fiscal year (FY21), mainly due to fresh borrowing from multilateral and bilateral sources on account of public debt.

Economists said that the federal government has borrowed enough in the preceding year to ensure timely external debt payments and build the country’s foreign exchange reserves.

The fresh external borrowing and other official foreign inflows also enable the federal government to finance the current account gap and higher goods trade deficit.

According to the State Bank of Pakistan (SBP), the country’s total external debt and liabilities (stocks) posted an increase of 8 percent during July-June of FY21. Pakistan’s total external debt and liabilities rose to $122.199 billion mark as on June 30, 2021 compared to $113.013 billion as on June 30, 2020, depicting an increase of $9.186 billion.

The total stocks of debt and liabilities comprise Paris Club, IMF loan, foreign exchange liabilities, Public Sector Enterprises (PSEs) guaranteed debt and non- guaranteed debt, banks borrowing, non-residential deposits, private sector guaranteed/ non-guaranteed debt and foreign exchange and debt liabilities to direct investors.

Reserves fall on external debt payment

However, as percent of GDP, total external debt and liabilities declined to 40.3 percent in June 2021 down from 45.7 percent in June 2020. The official foreign exchange reserve increased from $12.5 billion to $17.4 billion in FY21.

Public external debt has highest share of 78 percent in the country’s total external debt and liabilities. The detailed analysis revealed that public external debt posted an increase of 8.2 percent or $7.285 billion in FY21. External public debt surged to $95.177 billion in June 2021 compared to $87.885 billion end of June 2020.

During the period under review, among public debt, government’s external debt increased from $70.314 billion to $79.031 billion. While, IMF debt declined by $296 million to $7.384 billion.

In addition, during the period under review, Public Sector Enterprises (PSEs) debt went up by $1.574 billion to $6.745 billion. The banks’ borrowing increased from $4.62 billion in June 2020 to $5.267 billion in June 2021. Private Sector Debt showed downward trend and slightly declined by $123 million to reach $10.886 billion end of the last fiscal year, down from $11 billion.

Similarly, during the period under review, debt liabilities to direct investors also declined from $4.329 billion to $4.124 billion during the last fiscal year. Meanwhile, Pakistan spent some $13.424 billion including $11.3186 billion principal and $2.237 billion interest on external debt servicing during the last fiscal year.

Copyright Business Recorder, 2021

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