The country's external debt servicing reached $1.5 billion at the end of the first quarter of current fiscal year 2016-17 (FY17), mainly due to higher repayments of public debt. Economists expressed concern over the rising spending on account of external debt servicing saying that higher payments of foreign debt servicing will cast a negative impact on the country's liquid foreign exchange reserves. They said with rising debt servicing burden, the government is required to create new resources to earn more foreign exchange.
They said during last one and half years Pakistan has successfully built its foreign exchange reserves by completing the IMF Extended Fund Facility (EFF) programme and sale of five-year Sukuk Bonds in the international market. "Presently, the country's total foreign exchange reserves stand at $23.3 billion and Pakistan is able to manage its debt servicing. However, in long-term, Pakistan may face some problems and need more resources to maintain its reserves," they added.
According to the State Bank of Pakistan (SBP), after posting some decline in last fiscal year, payments under external debt servicing are on the rise, posting an increase of 15 percent during July-September of FY17 compared to same period of last fiscal year 2016. The country's total external debt servicing reached $1.545 billion during the first quarter of FY17 against the debt servicing of $1.335 billion in the corresponding period of FY16, depicting an increase of $210 million. During the period under review, total external debt servicing includes $660 million of principal amount, $289 million interest payment and $597 of short-term debt serving.
Category-wise analysis showed that an amount of $1.324 billion has been spent on debt servicing (including principal and interest) of public debt during the first quarter of this fiscal year compared to $1.127 billion in the same period of last fiscal year.
With 34 percent increase, some $109 million of debt servicing was made on account of Public Sector Enterprises (PSEs) debt. Debt servicing under bank borrowing was $5 million, up from $3 million.
However, during the period under review, debt servicing under the private sector declined by 13 percent. Debt servicing under the private sector fell to $107 million at the end of first quarter of this fiscal year compared to $123 million in the same period of last fiscal year. Pakistan's external debt servicing declined slightly during FY16 as compared to last year. Overall, some $5.31 billion were spent on external debt servicing during FY16 against $5.417 billion in FY15.