KARACHI: Pakistan’s external debt to GDP ratio fell to 6 years low, ie, 26 percent at the end of the last fiscal year (FY24), mainly due to lower increase in foreign currency borrowings.
The State Bank of Pakistan (SBP) on Thursday reported that the country’s total external debt and liabilities recorded an increase of 3.4 percent during the last fiscal year (FY24). Pakistan’s total external debt and liabilities reached the $130 billion mark as of June 30, 2024 compared to $ 126.142 billion as of June 30, 2023, depicting an increase of $4.6 billion.
The country’s public external debt, excluding foreign exchange liabilities, increased by $2 billion from $84.047 billion in FY23 to reach $86 billion at the end of FY24.
External debt, liabilities soar to $130.179bn by May
Although, in term of growth external debt is increasing, however, in term of GDP ratio it’s on decline. Analysts at Topline said that the country’s external debt to GDP has fallen to 6 year low at the end of the last fiscal year. It declined to 26 percent of GDP at the end of FY24 down from 32 percent in FY23 mainly due to relatively lower increase in foreign currency borrowings compared to local currency.
They said that increasing the external debt to export ratio indicates that external debt is rising faster than exports. In FY24, this ratio has come down to 253 percent compared to peak of 314 percent in FY20.
External Debt Servicing to foreign exchange reserves is 195 percent for FY24 and this is expected to come down to 89 percent for FY25. In addition, Pakistan debt to GDP has also fallen to 70 percent in FY24 as nominal GDP has grown faster than debt owing to higher inflation.
Pakistan is facing a balance of payment crisis for the past two years and looking for sufficient foreign inflows. The IMF in August last year approved a SBA program and disbursed $3 billion.
Now after completing the short-term programme, Pakistan and the IMF have reached staff level agreement for a long-term debt program of $7 billion to avoid the default and ensure timely external debt servicing.
Meanwhile, according to the SBP, during the last week the total liquid foreign reserves held by the country increased by $173 million to stood at $14.645 billion as of Aug 9, 2024. During the week under review, SBP’s reserves increased by $ 119 million to $ 9.273 billion.
The net foreign reserves held by commercial banks surged by $54 million to $5.372 billion at the end of last week.
Copyright Business Recorder, 2024