ISLAMABAD: The International Monetary Fund (IMF) has projected an increase in Pakistan’s external debt to reach $130.850 billion in 2023-24 up from $123.574 billion in 2022-23.

The Fund in its latest report on Pakistan stated that the country’s external debt is projected to further increase to $139.116 billion in 2024-25. External debt is projected to increase to 37.3 percent of GDP for 2023-24 compared to 36.4 percent of GDP in 2022-23.

Pakistan’s domestic debt has been projected at Rs43.574 trillion for 2023-24 and Rs49.803 trillion for 2024-25.

The report noted gross financing needs are very large, mostly due to large debt service payments, while external market financing has dried up. Confidence is weak, and credit rating agencies have downgraded Pakistan to just above default rating. Multilateral and official bilateral support has been critical to enable Pakistan to meet its debt obligations.

Risks to debt sustainability, already elevated at the time of the combined 7th–8th EFF reviews, have become more acute, given the scarcity of external financing and the large gross financing needs that persist over the coming years, further narrowing the path to sustainability.

Assuming decisive implementation of programme policies, macroeconomic prudence continuing onto the medium term, and adequate multilateral and bilateral financing, public debt can remain sustainable over the medium term. Any further downward revisions to the baseline could push debt towards unsustainability.

Copyright Business Recorder, 2023