November 25, 2021 (MLN): Pakistan’s external debt and liabilities (outstanding) reached nearly $127.02 billion during July-Sep FY22, an increase of $12.94bn or 11% YoY, the central bank data showed on Wednesday.

The increase is mainly attributable to the higher mobilization of foreign funds to plug fiscal and current account deficits and the accumulation of foreign reserves during the quarter.

As a percent of GDP, Pakistan’s external debt and liabilities increased from 39.6% of GDP in 1QFY21 to 40.2% of GDP in 1QFY22.

On a sequential basis, the country’s external debt and liabilities jumped by $4.8bn or 4% QoQ during Q1 of FY22 as the amount was $122.2bn at end of FY21.

During the PTI government, foreign debt rose by $32bn, while it was $95bn when the PTI government came into power. During PML(N) tenure, foreign debt soared by $34bn as it was $61bn when it came into power.

According to the latest data issued by the SBP, 78% of the entire debt can be attributed to public external debt, the combination of the government’s long term and short-term external debt, IMF loans to the central bank, and foreign exchange liabilities.  The government external debt which includes both long term and short-term external debt stood at $80.95bn during 1QFY22, up by 12% YoY and 2% QoQ, IMF loans to the central bank and federal government standing at $3.68bn and $3.39bn respectively, while foreign exchange liabilities outstanding recorded at $11.64bn during the period under review.

Within the public external debt, the long-term debt stood at $79.6bn, up by 12% compared to 1QFY21 and 2% compared to the previous quarter. Short-term debt (less than one year) increased by 10% YoY to $1.28bn compared to the figure recorded at the end of Sep’20. While it was increased by 50% from $858mn at the end of June’21.

The rest of the amount has been a result of government borrowing from public sector enterprises, banks, and the private sector.

Notably, short-term bank borrowing reached $2.7bn during Q1 of FY22, showing an increase of 3% QoQ and 12% YoY.

 Long-term bank borrowing was recorded at $2mn during 1QFY22, depicting a decline of 85% YoY and 42% QoQ.

Outstanding external debt of public sector enterprises (PSEs) during 1QFY22 stood at $6.68bn, the figure was 30% higher when it compared with 1QFY21 and 1% lower when it compared with the previous quarter.

Private sector external debt, which attributed to 10% of the total external debt amounted to $11bn by the end of 1QFY22, depicting a slight decline of 2% YoY and an increase of 2% QoQ.

Additional data posted showed the GDP (current market price) to have increased from $287.7bn in July-Sep FY21 to $315.68bn, showing a notable jump of 10% YoY. However, compared with the previous quarter, GDP at the current market price inched up by 4% from $303.28bn.

Official liquid reserves increased from $12.3bn in 1QFY21 to $19.37bn, marking an increase of 58% YoY. On a sequential basis, it was up by 11% from $17.4bn in 4QFY21.

Debt Servicing

Pakistan’s total external debt servicing (principal and interest) by the government reached a total of $1.65bn at the end of 1QFY22, down by 89% compared to FY21 and 88% YoY compared to FY20.

In the preceding year or FY21 principal and interest payments stood around $13.43bn while in FY20 and FY19 principal and interest payments stood around $14.57bn and $11.59bn respectively.

This indicates that in 3.3years, the government has paid a whopping $41.24bn as principal and interest. Whereas, in five years tenure of PML (N) principal and interest amount stood at $33.363 bn, while in five years tenure of PPP government, principal and interest amount paid was $24.306 bn.

Going by the SBP data, principal amount payments during 1QFY22 totalled $1.2bn, a major chunk of which ($1bn) comes from the public debt particularly concentrated under the government debt head. Interest payable on the principal of public debt totalled $336mn. While the interest paid on the principal of total debt totalled $441mn. Furthermore, during July-Sep FY22, Pakistan paid $819mn and $223mn principal amount on government debt and on IMF loans respectively. Whereas $282mn and $36mn were paid as interest payments on the government’s loan and on loans from IMF.

Meanwhile, it is pertinent to mention that within government external debt, the major chunk of $488mn (out of $819mn) was paid on multilateral loans followed by $315mn on commercial loans and credits as the principal amount.

Moreover, to meet foreign exchange liabilities, the government paid zero amount as a principal while $18mn retired as interest payments.

Debt servicing of the public sectors enterprises (PSEs) during 1QFY22 reached $47mn. Under this head, the country paid $40mn as principal payment and $7mn paid as interest.

Furthermore, the total debt servicing of the private sector (non-guaranteed debt) stood at $219mn in 1QFY22, of which $127mn was retired as principal amount while $92mn were paid as interest.

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