Pakistan's total debt

Pak’s Debt Surges To Rs 12 Trill In First Quarter

Pakistan’s total debt and liabilities spiked by Pakistani Rupees (Rs) 12 trillion or 23.7 percent in the first quarter of the current fiscal year, the loan trance from the International Monetary Fund and the devaluation of the rupee pushed the numbers up significantly, The News International reported citing analysts.

In the fiscal year, 2022-2023, in July-September the debt and liabilities stood at Rs 62.46 trillion which is more than the same period of last fiscal year, accounting for Rs 50.49 trillion.
The country’s debt rose 24.7 percent to Rs59.37 trillion, while total liabilities increased 23 percent to Rs3.56 trillion.

Fahad Rauf, head of research at Ismail Iqbal Securities said the increase in the debt was mainly by external sources. “Mostly the IMF [International Monetary Fund] loan tranche of USD 1.2 billion and the impact of the rupee depreciation on overall external debt.”

The government’s domestic debt increased by 18.7 percent to Rs 31.40 trillion. The foreign debt stood at Rs 17.99 trillion in July-September FY2023, 30.2 percent up from a year earlier, according to the figures from the State Bank of Pakistan (SBP), according to The News International.

Total external debt and liabilities jumped 33.4 percent to Rs 28.94 trillion.

“Managing debt obligations is one of the biggest challenges facing the government,” said Mustafa Mustansir, head of research at Taurus Securities.

However, there are concerns about the conclusion of the ninth review of the IMF’s bailout package.

Although the date has not yet been set, the IMF staff mission is anticipated in Islamabad by the end of this month because the Fund needs Pakistan to make necessary modifications first.

The government is requesting some exceptions on performance criteria due to flood losses and the Fund’s insistence on maintaining the agreed tax-to-GDP ratio of at least 11 percent.

The delay in the IMF’s review is making foreign investors more anxious, reported The News International.

Meanwhile, Pakistan’s risk of default, measured through the five-year currency default swap (CDS) index, on Monday increased by 4.2 percentage points reaching a new high at 64.2 percent. The development indicates that Pakistan did not have the resources to make the growing import payments and foreign debt repayments in time, The Express Tribune reported.

Pakistan is due to repay USD 1 billion against a five-year Sukuk (Shariah-compliant bond) which is scheduled to mature on December 5, 2022. According to Topline Research, the yield (rate of return) on the Sukuk increased by 964 basis points in a day to 69.96 percent. The increase in the yield is hinting that investors were thinking that Pakistan might default on the $1 billion Sukuk.

State Bank of Pakistan (SBP) Governor Jameel Ahmad has said that Pakistan had foreign exchange reserves of “over USD 9 billion, which are more than enough” for paying imports and repaying foreign debt.

The five-year CDS indicated a high risk of default after Pakistan announced that Saudi Arabia’s Crown Prince Mohammad bin Salman had postponed his visit to Islamabad, as per reported by The News International. (ANI)

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Pakistan Requests China To Roll Over $6.3 Billion Debt

Pakistan on Saturday requested its all-weather ally China to roll over its USD 6.3 billion debt amid a slump in its economy due to devastating floods.

The debt is maturing in the next eight months and the new proposal seeking a fresh Chinese loan to repay maturing bilateral debt during FY 2022-23 is also under consideration, ending on June 30, reported The Express Tribune.

Pakistan plans to arrange USD 34 billion in the current fiscal year to meet its debt and external trade-related obligations.

The issue of rollover and refinancing of nearly USD 6.3 billion commercial loans and the central bank debt was discussed in a meeting between Chinese Ambassador to Pakistan Nong Rong and Finance Minister Mohammad Ishaq Dar, reported The Express Tribune.

Sources said that both sides also discussed the issue of outstanding Chinese dues on account of payments to the Chinese Independent Power Producers for the cost of the electricity purchase.

Prime Minister Shehbaz Sharif is visiting Beijing on November 1 with a list of new projects and requests to roll over the existing debt, considering sanctioning new debt and preferential trade treatment for certain exportable goods.

Pakistan is under pressure from western institutions and the governments to seek rollover of Chinese debt, currently standing at USD 26.7 billion including public and publicly guaranteed debt, reported The Express Tribune.

Pakistan is expected to solve the lingering issue of opening a bank account to save Chinese companies from the vicious cycle of circular debt before the PM’s visit.

The proposed visit of PM Shehbaz to China was also discussed in the meeting and both sides hoped that it would enhance bilateral relations between both countries, the finance ministry said.

The USD 3.3 billion Chinese commercial loans and USD 3 billion worth SAFE deposits loans were maturing from now till June next year, according to the Ministry of Finance officials.

The SAFE deposit is on the balance sheet of the central bank. In addition to this, over USD 900 million in bilateral Chinese debt was becoming due during the current fiscal year, reported The Express Tribune.

Sources said that the government was seeking a rollover of the USD 3 billion SAFE deposit for more than one year, preferably for three to five years. China has extended a total of USD 4 billion in SAFE deposits and out of this USD 1 billion has already been rolled over in July this year.

For the current fiscal year, the International Monetary Fund and the Ministry of Finance have estimated Pakistan’s gross external financing requirements in the range of USD 32 billion to USD 34 billion, excluding the impact of the recent devastating floods, reported The Express Tribune.

Pakistan has already obtained USD 2.2 billion in loans during the July-September quarter while Saudi Arabia has also announced to roll over USD 3 billion debt maturing in December this year.

The country still needs to arrange USD 29 billion and it is looking for a minimum of USD 6.3 billion to USD 7.2 billion rollovers from China in addition to any fresh lending, reported The Express Tribune. (ANI)

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