Home »Stocks and Bonds » Pakistan » First quarter fiscal year 2018: over $2 billion spent on external debt servicing
The country's total external debt servicing exceeded $ 2 billion mark during the first quarter of current fiscal year (FY18). Sources in banking sector told Business Recorder Monday that with a huge burden of $85 billion external debt and liabilities, the payments under external debt servicing continued to surge compelling the country to spend over $ 2 billion on principal and interest payments.

Economists expressed serious concern over the rising spending on debt servicing saying high payments of foreign debt has already put a negative impact on the country's liquid forex reserves, forcing the country to go for more borrowing from the international market to keep the forex reserves at a reasonable level. The federal government has recently borrowed some $2.5 billion through the auction for Sukuk and Eurobond in the international market to build its depleting forex reserves, they added.

They said in the long-term, Pakistan may face some problems and need more foreign inflows to maintain its forex reserves, which surged to $21 billion in the first week of December after receiving inflows of $2.5 billion of Sukuk Bond and Eurobond. According to State bank of Pakistan (SBP), the country's total external debt servicing (principal and interest) stood at $2.094 billion during the first quarter (July-Sept) of FY18. Total external debt and servicing includes $1.711 billion of principal and $383 million of interest payment.

Similarly, on principal side, external debt servicing under public debt stood at $904 million, some $32 million on Public Sector Enterprises (PSEs) guaranteed debt, $53 million on PSEs non-guaranteed debt and $ 51 million on private non-guaranteed debt. Some $671 million were paid on account of short-term debt servicing. Debt servicing on account of interest includes some $31 million to the IMF, $8 million to Paris Club and $90 million of multilaterals.

Economists said that the decline in the SBP 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, they added. Total external debt servicing stood at $8.157 billion in FY17.



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