Pakistan to repay $24.8b in FY2024-25

SBP revises down foreign debt estimate by 5%, provides no explanation for reduction

KARACHI:

Pakistan’s central bank announced on Wednesday that the country will repay a total of $24.8 billion in foreign debt and interest payments for the fiscal year 2024-25. This figure is moderately lower than the previous projection of $26.2 billion, representing a 5% decrease ($1.4 billion). The downward adjustment suggests that the country may find it more manageable to meet its financial obligations than initially anticipated earlier in the week.

According to the latest update from the State Bank of Pakistan (SBP), the country will repay $21.2 billion in principal debt and an additional $3.6 billion in interest payments, totalling $24.8 billion for the year. On Monday, the central bank had estimated repayments at $26.2 billion, including $4 billion in interest. The bank did not provide an explanation for the reduction in the forecast.

The detailed breakdown reveals that Pakistan was scheduled to repay nearly $5 billion in July alone, including $437 million in interest. An additional $2 billion is due in the next two months (August and September 2024), including $545 million in interest to global lenders. The remaining $17.8 billion, including $2.6 billion in interest, will be paid in the last three quarters of the fiscal year (October 2024 to June 2025).

Topline Securities CEO Muhammad Sohail noted that the lower repayments in the coming months could boost the country’s foreign exchange reserves from the current $9.1 billion, particularly with the anticipated start of a $7 billion loan programme in August or September 2024. “The due amount in August and September 2024 seems to be only 8% of total obligations for the year. As a result, we believe, with the International Monetary Fund (IMF) approval expected by the end of August, FX reserves will improve,” he said.

At a press conference on Monday, SBP Governor Jameel Ahmad reassured that Pakistan does not face a foreign debt repayment crisis in FY25, as the current foreign exchange reserves of $9.1 billion are higher than the total debt repayment requirement of $9 billion, including interest, for the remaining 11 months (August-June) of the fiscal year. Ahmad added that Pakistan is expected to secure rollovers of another $14.3 billion from bilateral creditors like Saudi Arabia, Qatar, and China, as well as from bilateral commercial loans, primarily from Chinese banks.

Ahmad also reported that Pakistan had already received a rollover of $2 billion and paid $1.1 billion in the first 29 days of July 2024. Despite these notable payments, the country’s foreign exchange reserves decreased by only $400 million in the week ending July 19, marking a rare drop in the past month.

Ahmad projected that the SBP’s foreign exchange reserves would increase by $4 billion, reaching $13 billion by the end of the current fiscal year on June 30, 2025, driven by encouraging inflows of workers’ remittances and export earnings. Additionally, the anticipated approval of the IMF loan programme would unlock further multilateral and bilateral inflows, helping the country meet its foreign debt obligations on time.