Pakistan to Pay Debt on Time, SBP Governor Ensures

Karachi: On Thursday, 14 September 2023, Jameel Ahmad, the Governor of the State Bank of Pakistan (SBP), assured the government that Pakistan will timely pay $8 Billion in net debt repayments. The foreign exchange reserves are expected to increase during the second half of the financial year.

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It is vital to mention that the Governor SBP, in the latest episode of the SBP podcast series, clarified that “during the next seven months, only a debt of $4.7 billion is payable, allaying concerns of the country defaulting on international financial obligations”.

He explained, “According to the plan devised at the beginning of the year, $23 billion was the repayable debt, and the current account deficit was about $10 billion, which roughly adds up to $33 billion.”

He continued, “Out of the $23 billion principal amount, the government of Pakistan has already paid back over $6 billion, and almost $4 billion has been rolled over through bilateral agreements with other governments, so you can say that 10 billion has already been settled out of the total foreign debt”.

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However, according to Mr. Jameel, a total of $2.8 billion ($0.6 interest and $2.2 principal) has already been paid out of this sum. FY24’s Current Account Deficit (CAD) target is 0.5%-1.5% of GDP. He also noted that August’s CAD will be $160 million, significantly higher than earlier projections.

The Governor highlighted that the International Monetary Fund (IMF) had set all quantitative targets, including net international reserves, Non-Disclosure Agreements (NDA), and swaps. He continued that the government’s success entirely depends on the remaining performance criteria. It comprises government guarantees, primary budget deficits, and targeted cash transfers.

The recent Treasury Bills (T-bill) auction, where cutoff rates exceeded the policy rate, was attributed by the SBP to a backdrop of economic uncertainty, the devaluation of the Pakistani rupee, and market expectations of an inclined policy rate hike. Earlier, the central bank made the unexpected decision to maintain the policy rate at 22%, defying market forecasts.

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