The State Bank of Pakistan (SBP) released data on Wednesday showing that Pakistan plans to repay $24.8 billion in external debt during the current fiscal year, including $21.2 billion in principal repayments and $3.6 billion in interest payments.
For fiscal year 2025, the detailed breakdown requires $4.98 billion in July, $2 billion in August and September, and a cumulative $17.8 billion from October to June.
Despite the substantial amount, expectations are high that Pakistan will comfortably and timely manage these obligations, supported by improved foreign fund inflows and moderate current account deficits. These factors will likely aid in funding Pakistan’s external payment obligations throughout the fiscal year.
Additionally, SBP’s data shows that the total gross financing needs consist of $4 billion for interest and $22 billion for principal repayment. The bank expects to roll over $16.3 billion of the principal amount, leaving $10 billion to be repaid. In July alone, Pakistan has already repaid $1.1 billion, resulting in net repayments of $9 billion for the first 11 months of this fiscal year.
The central bank projects its foreign exchange reserves to reach $13 billion by the end of FY25, up from the current $9.1 billion. It notes an improvement in the quality of these reserves compared to previous years.
Recent analyses by Topline Securities highlighted that the due amounts for August and September 2024 represent only 8.0 per cent of the total annual obligations. The firm anticipates an improvement in foreign exchange reserves during these months, particularly with the expected approval of an IMF package at the end of August.
Moreover, Pakistan has recently experienced an influx of over $500 million in dollar inflows over the last two and a half months. This influx is partly due to foreign investments in high-yielding Pakistan T-bills, with expectations of currency stability supported by a long-term IMF programme. Consequently, the SBP has maintained the benchmark interest rate at 19.5 per cent despite an estimated 11.5-13.5 per cent inflation.
This update follows S&P’s affirmation of Pakistan’s long-term sovereign rating at ‘CCC+’, recognising the country’s dependence on external aid amidst a prolonged economic crisis. Similarly, Fitch upgraded Pakistan’s rating to ‘CCC+’, citing improved access to external funding under a new IMF deal.
Earlier in July, Pakistan secured a $7-billion bailout deal with the IMF, which was crucial for stabilizing the economy and averting a potential sovereign default. Discussions are ongoing with Saudi Arabia, the UAE, and China to meet gross financing needs under the IMF programme.
The SBP governor has noted significant improvements in Pakistan’s external position, including a narrowing current account deficit and increased reserves, not through borrowed funds but via FX market operations. The anticipated current account deficit for FY25 is forecasted to range between 0-1% of GDP, reflecting a moderate rise in imports and strong growth in worker remittances.
In FY2024, profit and dividend repatriation amounted to $2.2 billion, a substantial increase. This settlement of all outstanding payments to foreign investors further stabilized Pakistan’s economic engagements internationally.
