Pakistan Announces Reduced Foreign Debt Repayment for Fiscal Year 2024-25

On Wednesday, Pakistan’s central bank revealed that the country will repay a total of $24.8 billion in foreign debt and interest payments for the fiscal year 2024-25. This figure is a reduction from the previous projection of $26.2 billion, representing a 5% decrease of $1.4 billion. The adjustment indicates that meeting financial obligations might be more manageable than initially anticipated.

According to the latest update from the State Bank of Pakistan (SBP), the repayment schedule includes $21.2 billion in principal debt and $3.6 billion in interest payments. The revised estimate contrasts with Monday’s projection, which anticipated repayments of $26.2 billion, including $4 billion in interest. The SBP did not clarify the reasons behind the reduction in the forecast.

The breakdown of repayments shows that Pakistan was scheduled to repay nearly $5 billion in July alone, with $437 million allocated for interest. An additional $2 billion is due in August and September 2024, including $545 million in interest. The remaining $17.8 billion, which includes $2.6 billion in interest, will be settled in the last three quarters of the fiscal year (October 2024 to June 2025).

Muhammad Sohail, CEO of Topline Securities, noted that the lower repayment amounts in the coming months could positively impact the country’s foreign exchange reserves, which currently stand at $9.1 billion. He highlighted that with the expected start of a $7 billion loan programme in August or September 2024, and the anticipated IMF approval by the end of August, the foreign exchange reserves might improve.

SBP Governor Jameel Ahmad reassured that Pakistan does not face a foreign debt repayment crisis for FY25. He noted that the current foreign exchange reserves are sufficient to cover the total debt repayment requirement of $9 billion, including interest, for the remaining 11 months of the fiscal year. Ahmad also mentioned that Pakistan expects to secure rollovers of an additional $14.3 billion from bilateral creditors, including Saudi Arabia, Qatar, China, and from bilateral commercial loans, mainly from Chinese banks.

Additionally, Ahmad reported that Pakistan had already received a $2 billion rollover and made a $1.1 billion payment in the first 29 days of July 2024. Despite these payments, the country’s foreign exchange reserves decreased by only $400 million in the week ending July 19, a minor drop compared to the previous month.

Looking ahead, Ahmad projected that the SBP’s foreign exchange reserves would increase by $4 billion to reach $13 billion by the end of the fiscal year on June 30, 2025. This forecast is supported by positive inflows from workers’ remittances and export earnings, along with the anticipated approval of the IMF loan programme, which is expected to further bolster the country’s ability to meet its foreign debt obligations on schedule.