Amid economic decline, Pakistan faces USD 2.5 billion debt servicing obligation
Apr 09, 2022
Islamabad [Pakistan], April 9 : Amid a declining economy and political instability, Pakistan has to pay back a foreign debt to the tune of USD 2.5 billion on account of principal and mark-up obligations during the ongoing quarter (April-June) of the current fiscal year 2021-22.
Out of budgeted external debt servicing of USD 12.4 billion estimated by the Ministry of Economic Affairs Division (EAD), Islamabad, so far, it has paid out approximately USD 10 billion during the first nine months (July-March) of the current fiscal, News International reported.
Out of USD 12.4 billion in external debt servicing, there has been a principal amount of USD 10.4 billion and interest repayment of USD 2 billion, the report said.
Keeping in view the rapidly declining foreign currency reserves, the State Bank of Pakistan (SBP) hiked the interest rates by 250 basis points, jacking up the policy rate from 9.75 per cent to 12.25 per cent in an emergency meeting of the Monetary Policy Committee (MPC) held on Thursday.
The hike in policy rate is expected to badly affect the country's growth prospects with overall economic activities expected to face considerable impact.
According to the SBP, Pakistan's total liquid foreign reserves held by the country stood at USD 17.47 billion as of April 1.
The break-up of the foreign reserves position shows that the foreign reserves held by the State Bank of Pakistan stood at USD 11.3 billion and net foreign reserves held by commercial banks at USD 6.15 billion.
During the week ending on April 1, SBP reserves decreased by USD 728 million to USD 11.3 billion, largely due to debt repayment and government payment pertaining to the settlement of an arbitration award related to a mining project.
The next ruling government of Pakistan, regardless of the result of the ongoing no-trust motion, will have the uphill task to manage USD 5 billion on an immediate basis to shore up dwindling foreign currency reserves in the absence of the International Monetary Fund (IMF) programme, the report said.
Amid the ongoing political instability in Pakistan, the IMF has effectively suspended its programme in the country till a stable government is formed in the country.
