The country's total external debt servicing crossed $5 billion mark, up by 30 percent, during the first nine months of current fiscal year 2013-14 (FY14), owing to massive repayments to the International Monetary Fund (IMF). Economists said the higher external debt servicing is mainly due to scheduled payments of Stand-By Arrangement (SBA) to the IMF and despite a challenge of depleting forex reserves and slow foreign inflows, Pakistan has made all payments on time.
"Although, in short-term the higher debt servicing may put a negative impact on the forex reserves, however in long-term it is very supportive for an improved economic growth," they added. Followed by rising debt payments a massive decline has also been witnessed in the country's forex reserves and the country's liquid reserves declined to $9.1 billion in March 2014 compared to $11 billion in June last year, they added.
Sources said Pakistan is still required to pay Special Drawing Rights 400 million to the IMF under the SBA repayment in the last quarter (April-June) of this fiscal year. In terms of dollar it will be calculated some 620 million, which means by the end of this fiscal year the overall debt servicing will cross $6 billion mark.
According to the State Bank of Pakistan (SBP), the country spent about $5.387 billion on external debt servicing (principal and interest payment) during the first nine months (July-March) of FY14. This includes some $4.746 billion of principal amount and about $641 million of interest payment on external debt. In addition, the paid amount is some 30 percent or $1.26 billion higher than same period of last fiscal year, in which Pakistan paid $4.127 billion on account of debt servicing.
Some $1.809 billion have been spent on external debt servicing during first quarter of FY14, about $2.325 billion in second quarter and $1.254 billion in the third quarter of current fiscal year. A detailed analysis revealed that over 82 percent of servicing has been made on account of public debt, which includes government debt, Paris Club, the IMF and foreign exchange liabilities. While remaining heads have minimum servicing during the period under review.
Under the public debt, overall $4.413 billion ($3.68 billion of principal and $548 million of interest) have been spent on debt servicing during July-March of current fiscal year compared to some $3 billion in the corresponding period of last fiscal year, depicting a notable increase of some 47 percent. During the period under review, Public Sector Enterprises (PSEs) debt servicing stood at $567 million, bank borrowing $39 million and private sector debt servicing $369 million. The analysis showed that among public sector, major debt servicing was made on account of SBA repayment to the IMF. The total external debt servicing stood at $6.84 billion in FY13 which includes $5.553 billion of principal and $932 billion of interest payments.