The Pakistan Institute of Legislative Development and Transparency (PILDAT) has issued a report detailing its assessment of the recently-concluded general election, expressing deep concerns over a decline in fairness scores compared to previous election cycles.
Pakistan's dangerously low foreign exchange reserves and a steep debt repayment schedule looming for the fiscal year 2024 that begins in July, She is facing a stark prospect of potential default or even a larger balance of payments crisis in the 12 months ahead.
Data obtained unofficially from a senior source privy to the country’s debt repayment schedule shows Pakistan faces $8.7 billion in outflows on public debt payments in FY24 (including principal and interest) that are not subject to rollover.
On top of this, there is another $5bn approximately on private debt outflows as per the IMF staff report released in September 2022, bringing the total to $13.7bn in debt-related payments.
Repayments on account of publicly guaranteed debt are on top of this.
The monthly schedule of outflows as per this government data is shown in the attached graphic.
Assuming zero current account deficit, all rollovers going smoothly, debt payments made on time and no external financing support, the data shows State Bank’s foreign exchange reserves going negative by December of this year.
A large payment of $1.6bn is due in July, including $1bn of a Chinese SAFE deposit that is maturing and has been rolled over smoothly in all years since it was drawn.
Government accounting convention requires it to be listed as an outflow until a rollover date has been agreed between both parties. Should it be rolled over successfully again this year, July will still see a sizable outflow of $600 million. June is already seeing hectic activity around debt repayments.
In an analyst briefing following Monday’s monetary policy decision, the State Bank governor said $3.6bn was maturing this month, of which $400m has already been paid and another $2.3bn is likely to be rolled over. “We have concurrence from both sides on this,” he told the attendees, though it seems a date has not yet been agreed because the amount is still being counted as an outflow.
That still leaves a $900m further debt service bill in June to be covered from the reserves that are below $4bn already.
Of the total outflows on public debt accounts scheduled for the next fiscal year, $4.7bn is in July to December.
April 2024 sees a large bond maturity when outflows leap to $1.2bn, and June 2024 sees another $1.5bn maturity of several instruments, only some of which are eligible for rollover.
If the government succeeds in the next few days in getting a rollover on the $2.3bn loan from a consortium of Chinese banks that was announced on June 22 last year, the scheduled outflow for June 2024 will rise to $3.8bn since these maturities will then fall due next June.
According to the last IMF staff report, private debt repayments on external account for FY24 are $5bn. These funds are also, under normal circumstances, rolled over fairly easily provided the borrower has been servicing the loan on time. Whether or not they’ll represent a drain on the reserves in the forthcoming year depends on the ability of these borrowers to continue servicing their loans in foreign exchange.
The same report shows Pakistan’s total public debt repayments to be just under $20bn, with another $1.68bn to be repaid to the IMF, and $13bn given as rollover on short-term debt.
These numbers suggest outflows on public debt payments should be $8.7bn, consistent with unofficial government figures obtained by Dawn.
But this figure differs greatly from other numbers compiled by sovereign debt advisory firms and private creditors who hold Pakistani bonds.
One such data panel, drawn up by a European firm and seen by Dawn, shows public external debt servicing for FY24 to be slightly higher than $14bn.
Source: DawnNews
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