Pakistan loans debt services to reach $6 billion by 2020
Pakistan's public external debt servicing obligations are not more than US$ 6 billion per annum until 2020 as the amount appears manageable, especially keeping in view the existing level of country's foreign exchange reserves which are likely to grow in future.
State Bank of Pakistan (SBP) in its report ruled out the possibility of growing burden of foreign debts and liabilities on the country and its rising threats to default repayment to different international monetary agencies and banks.
The central bank provided details of public external debt and liabilities which recorded an increase of $ 2.3 billion during H1-FY16, reaching $ 57 billion by end-December 2015. This was mainly due to an increase in loan disbursements by multilateral donors and receipts from the IMF's Extended Fund Facility (EFF).
The country's external loan disbursements rose by $ 840.8 million in H1-FY16 over the same period last year as China disbursed $ 561.4million, ADB disbursed $ 47.2 million under the Social Protection Development and $ 394 million for sustainable energy reform program. Pakistan received $ 489.4 million from IDA, under the Power Sector Reform Development Policy Credit. The government borrowed $ 956.1 million from commercial lenders. It received $ 500 million as proceed of the Eurobond issued in September 2015.
The country's debt servicing of external debt declined by $ 549.2 million in H1-FY16, compared to the same period last year due to decline in the repayment of IMF which had peaked out last year. On the other hand, repayments to multilateral and bilateral donors remained almost at the same level as last year. The impact of the recent fall in external debt servicing is visible in indicators of the country's debt servicing capacity. Specifically, the ratio of external debt servicing to exports improved to 15.3 percent in H1-FY16 compared to 18.1 in the same period last year.
The central bank gave its analysis over the secure situation of repayment of loans to different agencies and banks as it has accumulated a significant amount of liquid FX reserves over the past couple of years - via both FX purchases from the interbank, as well as government mobilization of external loans. In fact, the rise in reserves as percent of external debt and liabilities basically suggests that SBP's reserves have increased more than the increase in external debt.
More importantly, SBP's reserves at their current level can comfortably finance twice as much payments (gross) as are expected for the next 12 months. This looks especially comforting when compared with a vulnerable situation just two years ago as public external debt servicing obligations are not more than US$ 6 billion per annum until 2020. This amount of repayments does not raise much concern, as the country has successfully met similar amount of obligations in FY13 and FY14, the report said. The debt servicing of $ 5.5 billion due in CY2016 are well within manageable level, especially keeping in view the existing level of country's FX reserves and expected continuation of FX inflows. Similar to the balance of payments, experts of central bank not see major risks on the inflation front in shortterm. On the one hand, global commodity prices are not expected to recover anytime soon, and on the other, a stable PKR is likely to keep inflation expectations further at bay. It is important to mention here that the 13 SBP liquid FX reserves used in this discussion exclude gold. While International Energy Agency (IEA) expects the oil glut to stay till 2017, the World Bank has recently lowered its 2016 forecast (January 2016) for crude oil prices to only US$ 37 per barrel from its previous forecast of $51 per barrel for the year (October 2015),, SBP report said.