Pakistan’s already precarious financial situation is expected to deteriorate further as the country prepares to tackle an external debt burden of USD 100 billion over the next four years. This debt is nearly ten times the amount of Pakistan’s current gross foreign exchange reserves, which stand at USD 9.4 billion, according to a report by The Express Tribune.
Pakistan’s Deputy Finance Minister, Ali Pervaiz Malik, disclosed on Thursday that the country faces significant challenges in repaying USD 100 billion by 2027. The revelation comes at a time when Pakistan is grappling with economic instability, further worsened by political uncertainty and a rising current account deficit.
The federal government is exploring various options, including seeking debt rollovers and restructuring from international lenders. Despite signing a USD 7 billion agreement with the International Monetary Fund (IMF), Finance Minister Muhammad Aurangzeb admitted that the IMF-backed program alone would not bridge Pakistan’s financial gap. He noted that between 2024 and 2026, the country would face a USD 5 billion financing shortfall.
Aurangzeb and Malik both faced tough questions during a recent meeting with Pakistan’s Standing Committee on Finance. Malik notably avoided directly addressing whether the government was considering an official debt restructuring program, further fueling speculation about the lack of a concrete plan to navigate the impending crisis.
In addition to the government’s liabilities, the external debt figure of USD 100 billion excludes other significant payments, such as obligations listed on the balance sheet of the State Bank of Pakistan and the financing of the country’s current account deficit.
The magnitude of the financial challenge is underscored by Pakistan’s projected debt repayment schedule for the fiscal year 2024-2025. Mohsin Chandna, Director General of Debt, reported that Pakistan is expected to pay USD 18.8 billion during that period. Notably, this figure excludes the central bank’s repayment obligations.
Chandna also highlighted that Pakistan plans to manage its repayment obligations by seeking rollovers from friendly nations. The country is banking on USD 12.7 billion in cash deposits, including a USD 700 million loan from Kuwait, alongside potential rollovers of USD 100 billion, involving contributions from Saudi Arabia (USD 5 billion), China (USD 4 billion), the UAE (USD 3 billion), and Kuwait (USD 700 million).
The government’s heavy reliance on rollovers and debt restructuring underscores the severity of Pakistan’s financial predicament. With no clear plan in place to tackle the looming debt crisis, Pakistan’s economic future remains uncertain, and experts fear that the country may face even harsher financial conditions in the coming years.
