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The country's external debt servicing has reached some $5 billion mark during the first nine months (July-March) of current fiscal year (FY18) due to massive repayments of public debt. Economists said the higher external debt servicing is mainly due to scheduled repayments to Paris Club and other financial institutions under the public debt. However, the positive thing is that Pakistan has fulfilled all debt obligations, despite a challenge of depleting forex reserves and slow foreign inflows, they added.
"Pakistan still has to make external debt servicing in the remaining period of this fiscal year, therefore it is being expected that overall debt servicing will be around $7 to $8 billion at the end of FY18," they said.
According to State bank of Pakistan (SBP), cumulatively the country has spent some $4.969 billion on account of external debt servicing (including principal, short-term and interest payment) during nine months (July-March) of FY18. The paid amount includes $3.52 billion of principle amount and $1.44 billion of interest payment on external debt.
Over $2 billion have been spent on external debt servicing during first quarter of FY18. This amount includes $1.704 billion principal and $389 million of interest payment. During the second quarter of this fiscal year, an amount of $1.523 billion (some $923 principal and $599 million interest) was paid. Some $1.354 billion were paid as debt servicing in the third quarter (Jan-March) of FY18.
The impact of rising debt servicing has already been witnessed in the shape of depleting forex reserves and the country's liquid reserves declined to $17 billion in May 2018 compared to $21 billion in June last year. As the foreign debt servicing is being made from the reserves held by SBP, a complete decline has been witnessed in SBP's reserves, which slid to $10.7 billion in May down from $16.1 billion in June 2017.
The sovereign debt issuance, along with other official borrowings from commercial, bilateral and multilateral sources helped slow down the decline in official forex reserves. The country has borrowed some $2.5 billion through the sale of Eurobond and Sukuk in the international market. In addition, Pakistan obtained a loan of $1 billion from a Chinese bank in April to fulfill the debt obligations.
The detailed analysis revealed that major external debt servicing has been made on account of public debt, which includes government debt, Paris Club, IMF and foreign exchange liabilities. The remaining heads have minimum servicing during the period under review. Overall, $3.748 billion have been spent on government debt servicing during July-March of current fiscal year. Some $687 million as private sector debt servicing, $45 million as banks' borrowing, $139 million to IMF and $334 million as PSEs debt servicing.
The country's external debt and liabilities have already reached historic high of $91.761 billion at the end of March 2018 compared to $83.431 billion in June 2017, showing an increase of $ 8.33 billion. Most of increase has been witnessed in public debt, which stood at $73 billion in March 2018 up from $66 billion in June 2017.

Copyright Business Recorder, 2018

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