Pakistan's dire financial situation could deteriorate further, as the country's debt is ten times greater than its current reserves
Islamabad [Pakistan], September 20: Pakistan's precarious financial situation may worsen over the next four years, as the country faces the need to repay an external debt of USD 100 billion—substantially more than its current foreign exchange reserves.
On Thursday, Deputy Finance Minister Ali Pervaiz Malik revealed that Pakistan will have to repay USD 100 billion to foreign lenders in the coming four years. Currently, Pakistan's external debt is approximately ten times greater than its gross foreign exchange reserves, which stand at USD 9.4 billion, according to the Express Tribune.
To manage this repayment, Pakistan is reportedly planning to seek rollovers and restructure its external debts due to its declining financial condition. Finance Minister Muhammad Aurangzeb indicated that despite entering a new USD 7 billion program with the International Monetary Fund (IMF), the country is unlikely to meet its external financing needs.
The Express Tribune reported that the IMF identified a USD 5 billion financing gap from 2024 to 2026, as stated by Aurangzeb to Pakistan's Standing Committee on Finance.
Malik also avoided a question regarding whether the government was contemplating debt restructuring. The reported USD 100 billion external debt due between spring 2024 and 2027 does not include payments for liabilities on the balance sheet of the State Bank of Pakistan or the financing of the current account deficit.
This situation underscores that the Pakistani government currently lacks a clear plan to repay these loans. The primary strategy appears to be requesting international lenders for a one-year extension on loan restructuring.
Additionally, the Director General of Debt, Mohsin Chandna, informed the standing finance committee that for the fiscal year 2024-25, Pakistan's external debt will amount to USD 18.8 billion, excluding the central bank's debt repayment responsibilities.
"The USD 18.8 billion will be repaid in the same manner as in the past, primarily through rollovers," the Minister of State for Finance explained in response to a question from MNA Nafisa Shah. Chandna also noted that cash deposits currently stand at USD 12.7 billion, including a previous USD 700 million loan from Kuwait.
The report further stated that the cumulative rollovers Pakistan is seeking total USD 100 billion, including loans from Saudi Arabia (USD 5 billion), China (USD 4 billion), the UAE (USD 3 billion), and Kuwait (USD 700 million).