In a recent press briefing following the Monetary Policy Committee (MPC) meeting, State Bank of Pakistan (SBP) Governor Jameel Ahmad expressed confidence that Pakistan will be able to meet its external payment obligations in the current fiscal year (FY25) without encountering significant challenges. Ahmad highlighted that Pakistan is projected to pay off $26.2 billion in external debt obligations during FY25, including both interest and principal payments.
He emphasized that a positive start had already been made in July, with the settlement of $3 billion in debt, comprising a $2 billion rollover and a $1.1 billion repayment. This leaves approximately $23 billion to be repaid over the remaining 11 months, with $3.7 billion in interest payment and over $20 billion in principal payment. Notably, Ahmad underscored that despite making timely payments on its external debt obligations in the previous fiscal year, Pakistan’s external reserves had increased from $4.4 billion to $9.4 billion, reflecting the strength of these reserves and our commitment to financial discipline.
Detailing the structure of the payments, Ahmad revealed that $12.3 billion would be subject to bilateral rollovers, $4 billion represented commercial loans for which bilateral arrangements had been made for rollovers, and the remaining $10 billion was marked as a repayable amount, with $1.1 billion already paid off in July. He assured that Pakistan’s capacity to service its foreign debt is fully available, given that the serviceable debt for the current fiscal year is lower than the existing foreign exchange reserves. Ahmad also explained that the expectations for additional inflows include potential investments, loans, or aid from international partners, as well as revenue from exports and remittances, which are expected to contribute to Pakistan’s foreign exchange reserves.
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In line with the SBP’s latest data as of July 19, foreign exchange reserves held by the SBP slightly decreased to $9.02 billion, while total liquid foreign reserves stood at $14.33 billion, and net foreign reserves held by commercial banks amounted to $5.31 billion. Notably, concerns regarding Pakistan’s external financing needs and debt sustainability have been raised by international ratings agencies and analysts. Furthermore, Pakistan has initiated discussions on reprofiling its power sector debt to China, and is in talks with Saudi Arabia, the United Arab Emirates, and China to meet financing needs under the IMF program.
In efforts to address these concerns and ensure robust financial management, Finance Minister Muhammad Aurangzeb highlighted that Pakistan is committed to addressing the reprofiling of Chinese credit to the power sector on a project-by-project basis, affirming that the intention is reprofiling and not restructuring of debt. To this end, Pakistan is actively exploring and fostering strategic collaborations with international partners to meet its gross financing needs, seeking board-level approval under the IMF program.
