Pakistan’s total foreign debt servicing is expected to reach $23 billion in the upcoming fiscal year 2022-23, as repayment of commercial loans has now assumed a significant portion of the outstanding amount of $6 billion out of total obligations.
In an alarming development, the country will be required to repay $49.23 billion in amortization and mark-up amounts owed by the public sector alone over the next five years, from 2022-23 to 2026-27.
For the current fiscal year 2021-22, total debt servicing requirements in the form of principal and markup are projected to be $12.4 billion for the entire fiscal year, with the government has paid out $6.253 billion in repayments in the first eight months until February 2022.
Amid rising external debt obligations, the Ministry of Finance’s Debt Office has practically become dysfunctional, with acting head Umar Zahid resigning last month after accepting a new job abroad. The Ministry of Finance has given acting charge to its Joint Secretary Javed Iqbal, but the Debt Office has no responsibility to manage the country’s foreign debt professionally.
According to official documents, the government will be required to repay the $3 billion Saudi Fund for Development (SFD) Time Deposit in the coming fiscal year. However, the government has already requested that the Kingdom of Saudi Arabia (KSA) grant a rollover of $3 billion in deposits, which the KSA has agreed to in principle, but the exact conditions must be worked out.
Amid the State Bank of Pakistan’s depleting foreign exchange reserves, which stand at $9.7 billion in May 2022 versus $20 billion in August 2021, indicating a $10.3 billion decrease in reserves, rising foreign debt servicing demonstrates that the country urgently requires major dollar injections to avoid insolvency on external debt repayments and obligations.