Debt repayments to pose significant challenges for Pakistan

Pakistan is expected to borrow $ 4 billion from Asian Development Bank, World Bank, China and local banks to pay off maturing liabilities during the final quarter of fiscal year 2018, according to a source at Ministry of Finance.

Government of Pakistan is expected to pay $ 3.5 billion in the coming quarter to lenders amid declining forex reserves. The situation has cornered Pakistan into seeking additional funds from local and international institutions.

Pakistan faces a mammoth task ahead as liabilities worth $ 3.5 billion are expected to mature during the last quarter of fiscal year, 2018. The situation has become extremely challenging for Pakistan, as reserves continue to decline as a consequence of waning exports, external debt servicing, and other official payments.

Reviewing the schedule of repayments, it is estimated that liabilities worth $ 3.5 billion are to be paid during the coming few months which are set to bring down country’s total forex reserves to $ 15.4 billion. Pakistan’s Forex Reserves as of 9^th of February are at $ 18.968 billion.

Despite trying every trick in the book, policy makers have not been able to reverse the trend of rising imports which has taken current account deficit to an alarming level. The maturing amounts in the coming quarter include both the principal and interest payments.

Congruous to past trends, Pakistan is expected to borrow more to pay off its previous liabilities. A Ministry of Finance employee, while speaking to MG Link News on the condition of anonymity informed that, Government expects to borrow a total $ 4 billion from international agencies and countries to ease the pressure on current account.

The debt refinancing will involve borrowing from different international financial institutions, countries, and local banks. Of the $ 4 billion, Asian Development Bank is expected to provide $ 450 million, and around $ 400 are to be received from World Bank. China, Pakistan’s all-weather partner, is likely to lend $ 500 million. In addition to international agencies and countries, local commercial banks are also likely to contribute $ 1.5 billion.

Sources at Finance Ministry also informed MG Link News that in order to raise the remaining $ 1 billion, Government is considering to hold another bond issue in June 2018. Pakistan hopes to raise $1 billion from a sale of Euro bonds in a bid to bolster the declining reserves account.