Pakistan is on the brink of a potential default on its external debt repayments, with obligations totaling $10.35 billion due by the end of December 2023. The country is urgently seeking injections of $4 to $6 billion to avert a balance of payment crisis. The repayment burden, coupled with dwindling foreign exchange reserves, emphasizes the need for immediate financial assistance or the revival of the International Monetary Fund (IMF) program before June 2023.
Debt Repayment Schedule:
According to available details, Pakistan will need to repay $3.79 billion in principal and interest during the first quarter (July-September) of the upcoming fiscal year. This amount will rise to $6.568 billion in the second quarter (October-December) of the same fiscal year.
Among the significant repayments, Pakistan has Eurobond obligations amounting to $1.219 billion in the second quarter, including a principal sum of $1 billion and an interest payment of $219 million. While some deposits are expected to be rolled over, the remaining $6 billion in loan requirements must be managed with the country’s limited foreign exchange reserves.
Debt Repayment Breakdown:
China holds a significant portion of Pakistan’s debt, with $363 million, including a principal loan of $280 million and an interest payment of $83 million, due in the first quarter. Bilateral debt repayments during the same period amount to $1.05 billion, with France, Japan, Korea, China, Kuwait, and the UAE among the recipients.
Saudi Arabia is set to receive $398.08 million in foreign loan repayments from Pakistan in the first quarter of the next fiscal year. Additionally, commitment charges of $12 million will be paid as a penalty to international creditors.
Other debt repayments include $72 million for Eurobond interest, $84 million for commercial loan interest, and $235 million to the International Monetary Fund. Furthermore, multilateral creditors, including the Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), World Bank, and Islamic Development Bank (IDB), require repayments totaling $660.58 million in the first quarter.
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Implications for the Economy:
The staggering sum of $3.79 billion in debt repayments during the first quarter and a total of $6.568 billion in the second quarter pose a significant risk to Pakistan’s economy. The country’s current foreign exchange reserves stand at approximately $4 billion, making it imperative to secure additional funds or seek assistance to ensure timely repayments and prevent a balance of payment crisis.
Pakistan’s looming external debt repayment obligations highlight the pressing need for financial assistance or the revival of the IMF program. With a total of $10.35 billion due by December 2023, Pakistan must secure immediate injections of $4 to $6 billion to avert a potential default. The government is actively seeking rollovers of deposits from friendly countries, but the remaining loan requirements must be carefully managed given the country’s limited foreign exchange reserves. Swift action and strategic financial planning are crucial to ensure Pakistan’s economic stability and avoid a severe debt crisis.
