Paks external debt, liabilities touch USD 89 billion: report

Pakistans external debt and liabilities rose sharply to almost USD 89 billion at the end of December as country faced declining foreign exchange reserves and weakening capacity to repay debts, according to a media report.
Former finance minister Dr Hafiz Pasha had predicted in December 2015 that by June 2019, Pakistans external debt and liabilities would touch USD 90 billion.
Pakistans total external debt and liabilities as of December 2017 stood at USD 88.9 billion, higher by USD 5.8 billion or 6.9 per cent over six months ago, the Express Tribune quoted the State Bank of Pakistan (SBP).
There was an increase of USD 13.2 billion in the amount of external debt and liabilities in just one year.

In December 2016, external debt and liabilities amounted to USD 75.7 billion. At the time, Pakistans gross official reserves were USD 18.6 billion, which have already slid to USD 12.8 billion.
Out of total external debt, the governments direct obligations are equal to USD 70.5 billion, which exclude guaranteed and public sector enterprises debt.

The main increase came in the external debt contracted by issuing sovereign bonds and taking expensive commercial loans. In the first half, debt obligated by issuing Sukuk and Eurobonds increased by 52 per cent to USD 7.3 billion.
Similarly, the debt obtained by taking commercial loans increased to USD 5.3 billion by December 2017 a net addition of USD 503 million or 10.4% in six months. On a yearly basis, debt accumulated through commercial loans increased by 189 per cent or USD 3.5 billion.

The rise in external debt comes at a time when official foreign currency reserves are plunging as well. The SBP has already lost USD 3.5 billion worth of reserves since the start of the fiscal year.
The alarming figures indicate the governments inability to ensure enough non-debt creating inflows to meet external account requirements. Due to huge domestic and foreign borrowings, debt servicing is now the single largest charge on the federal budget.
A sum of USD 3.62 billion was spent on the servicing of outstanding stock of external debt in just six months, according to the central bank. The country paid USD 2.7 billion in principal loans and USD 988 million in interest on outstanding loans.

The government could not get any foreign loan rescheduled in the first half of the fiscal year, unlike last year when it was able to roll over USD 1.2 billion worth of external loans.
Two weeks ago, the government had admitted before the National Assembly that Pakistans external debt bearing capacity has deteriorated further.
In its Debt Policy Statement 2017-18, which the finance ministry submitted to the lower house of parliament, the government admitted that during the last fiscal year the countrys external debt increased at a faster pace than its foreign exchange earnings did.
In addition, Pakistans external debt in percentage of foreign exchange reserves also increased to the three-year high. Similarly, the cost of external debt servicing in percentage of foreign exchange earnings significantly increased also the highest than the last year of the Pakistan Peoples Party government.

Due to the widening current account deficit, independent economists have lately estimated the gross external financing requirements in the range of USD 24 billion to USD 26 billion for the current fiscal year. The governments conservative estimates put the figure at USD 18 billion.
The financing gap is estimated at roughly USD 6 billion for the remainder period of the current fiscal year, which would either be met through more foreign loans or drawing official foreign currency reserves.