According to the Finance Division, Pakistan’s external debt obligations are projected to surpass $100 billion between fiscal years 2025 and 2029. Mohsin Mushtaq, Director General (Debt), informed the National Assembly Standing Committee on Finance that $12.7 billion will be rolled over by friendly nations in the current fiscal year, including $5 billion from Saudi Arabia, $4 billion from China, $3 billion from the UAE, and $0.7 billion from Kuwait.
Friendly nations pledge $12.7 billion rollover in FY24.
During a confidential briefing on the International Monetary Fund (IMF) agenda, the committee was informed that Pakistan’s financial needs exceed the current IMF bailout package. Sources cited Finance Minister Muhammad Aurangzeb, stating that Pakistan will receive $7 billion from the IMF, with an additional $5 billion expected from commercial banks and other lenders.
The IMF has been assured of support from friendly nations regarding loan rollovers, which has led the Fund to schedule further discussions on Pakistan’s economic program. The IMF has also been briefed on Pakistan’s ongoing power sector reforms.
As of June 2024, Pakistan’s total public debt stood at Rs71.2 trillion, comprising Rs47.2 trillion in domestic debt and Rs24.1 trillion in external debt. The budget for FY24 was based on an average policy rate of 17.2%, which is anticipated to decline. According to Mushtaq, who also forecasted a decrease in petroleum prices and the dollar-to-rupee exchange rate, a 1% reduction in the policy rate would result in approximately Rs320 billion in savings on domestic debt.
Minister of State for Finance Ali Pervaiz Malik acknowledged the vulnerability of Pakistan’s external account despite the recent IMF agreement. He added that the IMF’s review would occur six months after the disbursement of the first installment.
The committee was briefed on the country’s external financing needs, exceeding $100 billion over the next five years, to meet debt obligations. This includes the $12.7 billion rollover from friendly countries. Although foreign exchange reserves recently increased to $9.5 billion, the external account remains precarious. Pakistan’s debt-to-GDP ratio improved to 67.2% from 75%, but the total debt rose from Rs62.88 trillion to Rs71.24 trillion in FY23.
Pakistan faces external payments of $18.83 billion in FY25, $9.23 billion in FY26, $8.71 billion in FY27, $7.68 billion in FY28, and $6.88 billion in FY29, excluding deposits from friendly countries.
Committee member Hina Rabbani Khar emphasized that Pakistan’s economy remains fragile, lacking sustainable economic strategies. Ali Pervaiz Malik assured the committee that the government is focused on fiscal consolidation, structural reforms, and stabilizing the economy, including broadening the tax base, reforming Public Sector Enterprises, and reducing the fiscal deficit.
Key debt management strategies include expanding the investor base, extending the maturity profile of debt, enhancing engagement with investors, and promoting the development of the non-bank sector, including Shariah-compliant debt markets. Pakistan also plans to tap into international capital markets through instruments such as Panda Bonds, Eurobonds, and ESG bonds.
While the committee appreciated the government’s measures, concerns were raised over tax reforms causing unrest among traders. A separate meeting was proposed to facilitate dialogue between the government and traders. The committee also expressed dissatisfaction with the absence of the Securities and Exchange Commission chairman during discussions on mutual funds, urging stronger engagement from institutional leaders.
The meeting concluded with a commitment to ongoing dialogue and cooperation to ensure fiscal discipline and economic stability.
