‘High debt servicing damaging country’s image’

MCCI predicts Pakistan will need to keep borrowing to repay current bills

MULTAN: The business community expressed serious concern over rising debt servicing, saying high repayments of foreign debt have already put a negative impact on the country’s liquid foreign exchange reserves, forcing the country to go for more borrowing from the international market.

They said that the federal government has recently borrowed $2.5 billion by auctioning Sukuk and Eurobonds in the international market to fill up its depleting forex reserves.

Multan Chamber of Commerce and Industry (MCCI) President Malik Asrar Ahmed Awan said that Pakistan may need more foreign inflows in the long-run to maintain its reserves.

According to the State bank of Pakistan (SBP), the country’s total external debt servicing stood at $2.09 billion during the first quarter (July-Sept) of FY18. Total external debt and servicing includes $1.71 billion of principal and $383 million of interest payment.



Similarly, on principal basis, external debt servicing of public debt stood at $904 million with $32 million being repaid on guaranteed debt of Public Sector Enterprises (PSEs), $53 million on PSEs’ non-guaranteed debt and $51 million on private non-guaranteed debt.

An amount of $671 million was also paid on account of short-term debt servicing. Debt servicing on account of interest included some $31 million to the IMF, $8 million to Paris Club and $90 million to multilaterals lenders.

MCCI SVP Romana Tanvir Sheikh and VP Khawaja Muhammad Farooq said that the decline in SBP’s reserves also reflects lower inflows and higher foreign payments. Inflows from donor agencies remained much lower than projections, while debt servicing moved up compared to last year, he added.

He said that the country’s total external debt servicing exceeded the $2 billion mark during the first quarter of current fiscal year (FY18).

Published in The Express Tribune, January 3^rd, 2018.

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