The country's total external debt servicing has reached near about 7 billion dollars during nine months of the current fiscal year mainly due to rising burden of foreign debt and payments of scheduled banks borrowing. The State Bank of Pakistan (SBP) on Tuesday said that the country's payments under external debt servicing stood at $6.946 billion, including $6.19 billion of principal amount and $756 million of interest in July-March period of fiscal year 2010-11.
This debt servicing during nine months of current fiscal year is also some 20 percent higher than the total debt servicing in last fiscal year. Debt servicing during the fiscal year 2010 stood at $5.787 billion, including $4.772 billion principal amount and $1.015 billion of interest payment. Debt servicing is gradually increasing and surged to $2.7 billion in third quarter of current fiscal year as compared to $1.7 billion in first quarter. According to SBP, $1.703 billion worth debt servicing was made in first quarter (July-September) this include $236 million of interest and $1.467 billion of principle amount.
An amount of $2.517 billion was paid in second quarter (October-December), including $2.211 billion of principal amount and $306 million of interest payment. Similarly, total worth $2.726 billion servicing was made in third quarter (January-March), which included $2.512 billion of principle amount, besides $214 million of interest.
The country has also rescheduled billions of dollars foreign loans due to insufficient foreign exchange reserves and about $1.588 billion foreign debts have been rescheduled in July-March of current fiscal year to reduce burden of foreign debt payments and maintain foreign exchange reserves at a suitable level. Rescheduled loans in last fiscal year 2010 stood at $1.72 billion.
According to details, $500 million was rescheduled in first quarter, $550 million in second quarter and $538 million in third quarter of fiscal year 2010-11. Economists expressed serious concern over the massive spending on debt servicing and termed it as an alarming situation for policy markers. The country's foreign reserves are already on downward track for last few weeks due to high foreign payments, they said.
"The country's foreign reserves are already depleting and declined to 17.107 billion dollars in last week of April due to rising foreign payments," Dr Shahid Hasan Siddique, an economist, said. He said that huge payments under the debt servicing and depleting reserves may affect exchange rate.
From next fiscal year its will further increase as $1.4 billion of first instalment of International Monetary Fund (IMF) Stand By Arrangement (SBA) has to be paid, he said, adding that it would be very difficult to pay from own resources, as IMF has already stopped two tranches of SBA. Talking about high home remittances, Shahid said: "We think it's a temporary or artificial jump in home remittances, and may decline in upcoming months".
In addition, Pakistan's exports, although they have touched $20 billion mark, the growth is in unit price and not in unit numbers. "Besides, growth in exports is less than our competitors like India and Bangladesh," he elaborated. "In the light of these observations, we can say that Pakistan may face difficulties in future," he added.
The major payments under the debt servicing have been made on account of scheduled banks borrowing, under which $4.379 billion as been paid, including $4.373 billion principal amount and $6 million of interest. Similarly, debt servicing under foreign exchange liabilities and loans stood at $34 million in July-March of fiscal year 2011. Payments to IMF and Paris Club stood at $315 million comprising $186 million of principal and $129 million of interest in first nine months of current fiscal year. It may be mentioned here that the country's foreign debt and liabilities had reached peak level of $59.53 billion on March 31, 2011 from $55.9 billion of June 30, 2010.