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Debt servicing claims $5.6bn
By Shahid Iqbal
KARACHI, Aug 6: Pakistan paid a staggering $5.6 billion as debt servicing during the last fiscal ended on June 30, which was 43 per cent of the official foreign exchange reserves of the country.
The State Bank reported on Friday that the country paid $4.632 billion as principal amount while $1.007 billion was paid as interest on the entire foreign debt and liabilities.
This massive payment was possible mainly because of continued higher inflows from IMF, overseas Pakistanis, US aid and loans from other donor agencies.
Analysts said the increasing debt servicing has the potential to put the country once again in trouble while the only thing that may correct the situation was the effort to maintain and increase the foreign inflows.
The foreign debt of the country sharply rose during the last fiscal as the government borrowed from international donors to remain liquid for such huge payments while it has been facing current account deficits for years.
The foreign debt increased by $3.295 billion to $55.628 bil lion during the last fiscal. It included $8.077 billion IMF loan mostly received as the emergency loans to avoid default.
The foreign exchange liabilities of the country noted slight decline as it reached $1.122 billion from $1.274 billion a year ago.
According to the report, the amount paid by the country for debt servicing (principal plus interest) in fiscal 2010 was 43 per cent of the foreign exchange reserves reflecting the serious lack of depth in the countrys payment ability.
If the external flows come down due to certain reasons, the country might have to face the same situation as it did face in 2008. The last fiscal witnessed record inflows of $8.9 billion from overseas Pakistani workers, around $8 billion aid from IMF and inflows from other sources including US aid to help Pakistan fighting terrorism in its Northern areas.
These inflows saved Pakistan from widening of current account deficit which reduced to around $3.5 billion during the last fiscal. Analysts believe that situation like red alert is always there at the ex ternal front.
The higher debt servicing has been a serious problem for the country which used to force governments in Pakistan to get emergency help from the international donors like IMF.
The volume of debt servicing is rising each year with the increasing foreign debt. Next year the total debt repayment might be more than the payment of 2010 and the inflows could be less than last year which means sharp fall in the countrys foreign exchange reserves.
The situation could be once again the same as it was in 2008 as the foreign inflows are not sustainable, said Atif Ahmed, a currency expert.
He said both IMF loan and remittances could drop with their own reasons. Remittances might face decline due to global recession while the IMF has already paid over 60 per cent of emergency loan of $11.3 billion.
The only possible way to avoid default like situation in future Pakistan will have to go for rescheduling of loans, said Atif adding that in this case the loans would be costlier.
Debt servicing claims $5.6bn
By Shahid Iqbal
KARACHI, Aug 6: Pakistan paid a staggering $5.6 billion as debt servicing during the last fiscal ended on June 30, which was 43 per cent of the official foreign exchange reserves of the country.
The State Bank reported on Friday that the country paid $4.632 billion as principal amount while $1.007 billion was paid as interest on the entire foreign debt and liabilities.
This massive payment was possible mainly because of continued higher inflows from IMF, overseas Pakistanis, US aid and loans from other donor agencies.
Analysts said the increasing debt servicing has the potential to put the country once again in trouble while the only thing that may correct the situation was the effort to maintain and increase the foreign inflows.
The foreign debt of the country sharply rose during the last fiscal as the government borrowed from international donors to remain liquid for such huge payments while it has been facing current account deficits for years.
The foreign debt increased by $3.295 billion to $55.628 bil lion during the last fiscal. It included $8.077 billion IMF loan mostly received as the emergency loans to avoid default.
The foreign exchange liabilities of the country noted slight decline as it reached $1.122 billion from $1.274 billion a year ago.
According to the report, the amount paid by the country for debt servicing (principal plus interest) in fiscal 2010 was 43 per cent of the foreign exchange reserves reflecting the serious lack of depth in the countrys payment ability.
If the external flows come down due to certain reasons, the country might have to face the same situation as it did face in 2008. The last fiscal witnessed record inflows of $8.9 billion from overseas Pakistani workers, around $8 billion aid from IMF and inflows from other sources including US aid to help Pakistan fighting terrorism in its Northern areas.
These inflows saved Pakistan from widening of current account deficit which reduced to around $3.5 billion during the last fiscal. Analysts believe that situation like red alert is always there at the ex ternal front.
The higher debt servicing has been a serious problem for the country which used to force governments in Pakistan to get emergency help from the international donors like IMF.
The volume of debt servicing is rising each year with the increasing foreign debt. Next year the total debt repayment might be more than the payment of 2010 and the inflows could be less than last year which means sharp fall in the countrys foreign exchange reserves.
The situation could be once again the same as it was in 2008 as the foreign inflows are not sustainable, said Atif Ahmed, a currency expert.
He said both IMF loan and remittances could drop with their own reasons. Remittances might face decline due to global recession while the IMF has already paid over 60 per cent of emergency loan of $11.3 billion.
The only possible way to avoid default like situation in future Pakistan will have to go for rescheduling of loans, said Atif adding that in this case the loans would be costlier.
Debt servicing claims $5.6bn
