The critical condition of Pakistan’s finances may take a turn for the worse within the next four years. The country will soon have to pay an external debt of USD 100 billion, which is several times more than the current foreign exchange reserves.
Upcoming Debt Repayment
Pakistan’s Deputy Finance Minister, Ali Pervaiz Malik, revealed on Thursday that in the coming four years, Pakistan will have to repay USD 100 billion to external moneylenders. Currently, the external debt owed by Pakistan’s federal government is around ten times more than the current USD 9.4 billion in gross foreign exchange reserves, as reported by the Express Tribune.
Plans for Debt Management
Reportedly, Pakistan is planning to manage the upcoming repayment by securing rollovers and restructuring its external debts due to its deteriorating financial condition. Finance Minister Muhammad Aurangzeb stated that despite signing a USD 7 billion International Monetary Fund (IMF) program, the country will not be able to meet its external financing requirements.
IMF Financing Gap
According to the Express Tribune, the IMF has identified a USD 5 billion financing gap between 2024 and 2026. Aurangzeb shared this information with Pakistan’s Standing Committee on Finance. Ali Pervaiz Malik also attempted to sidestep a question about whether the government was considering debt restructuring.
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Lack of a Repayment Plan
The current scenario and statements from Ali Pervaiz Malik highlight that the government of Pakistan lacks a clear plan for repaying these loans. The only feasible option for Pakistan is to request its international lenders to restructure their loans for an additional year.
Future Financial Obligations
A report also stated that Mohsin Chandna, Director General of Debt, informed the Standing Finance Committee that for the fiscal year 2024-25, Pakistan’s external debt has amounted to USD 18.8 billion. This figure excludes the repayment obligations of the central bank.
“The USD 18.8 billion would be paid in the same manner it had been paid in the past, which is through rollovers,” said the Minister of State for Finance while responding to MNA Nafisa Shah’s inquiry. Chandna also noted that cash deposits amounted to USD 12.7 billion, with Kuwait having provided a USD 700 million loan in the past.
Rollovers and Financial Support
The report further indicated that the rollovers Pakistan will seek are cumulatively USD 100 billion, which includes loans from Saudi Arabia (USD 5 billion), China (USD 4 billion), the UAE (USD 3 billion), and Kuwait (USD 700 million), as stated by Chandna.
In summary, Pakistan’s financial landscape remains precarious, with substantial external debts looming and a lack of strategic repayment plans.
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