KARACHI: The country's total external debt servicing crossed $4.6 billion mark during first nine months of current fiscal year, ie, 2012-13 (FY13), mainly due to repayment to the International Monetary Fund (IMF). "The higher external debt servicing is owing to repayment of Stand-By Arrangement (SBA) to the IMF. Although, this is a good indication that the burden of external debt is gradually reducing, however in short term, the higher debt servicing puts a negative impact on the economy," economists said.
The impact of rising debt servicing has already been witnessed in the shape of depleting foreign exchange reserves and since June 2012, the country's forex reserves fell to $11.6 billion as on May 10, 2013 from $15.23 billion. As the foreign debt servicing is being done through reserves held by SBP, a complete decline has been witnessed in SBP's reserves, which fell to $6.9 billion from $10.801 billion, they said.
Economists said that major debt servicing has been made on account of SBA repayment to the IMF. Pakistan availed SBA in November 2008 and received $7.433 billion from the IMF to avoid default as the country's reserves were at lowest level followed by higher current account deficit. As per agreement and repayment schedule agreed between Pakistan and the IMF, the country had started repayment to the IMF in FY12 and will repay total loan to the IMF in fiscal year 2014-15.
"Pakistan has to pay three more instalments of SBA programme to IMF during remaining period of this fiscal year and therefore it is being expected that overall debt servicing will be around $5 billion by end of FY13," they added.
According to State bank of Pakistan (SBP) overall, the country spent about $4.6 billion on account of external debt servicing (including principal, short-term and interest payment) during nine months (July-March) of FY13. The paid amount includes some $3.469 billion on account of principal amount and about $658 million of interest payment on external debt, while remaining amount of $475 million was paid as short-term debt servicing (principal) during the period under review.
In addition, overall external debt servicing during first nine months is even higher than total servicing of last fiscal year (2011-12), in which the country spent about $4.508 billion on account of total external debt servicing. Some $1.12 billion (including principal and interest) have been spent on external debt servicing during first quarter of FY13, about $1.975 billion in second quarter and $1.507 billion in third quarter of current fiscal year.
The detailed analysis revealed that over 87 percent of servicing has been made on account of public debt, which includes government debt, Paris Club, IMF, foreign exchange liabilities. While remaining heads have minimum servicing during the period under review.
Under public debt overall $4 billion (including principal and interest) have been spent on debt servicing during first nine months of current fiscal year. This amount is also higher than the debt servicing under this head in FY12. External debt servicing on account of public debt was stood at $3.69 billion (including principal and interest) during last fiscal year. Total external debt servicing stood at $4.508 billion in FY12. This included $1.019 billion of interest payment, $3.294 billion of principal amount and some $195 million of debt servicing of short-tem debt.
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