The total external debt and liabilities of Pakistan grew $600 million to $106.9 billion in July to September of the ongoing financial year. Because Pakistan obtained more, largely from the International Monetary Fund (IMF), to develop its foreign payment capacity.
On Friday, the State Bank of Pakistan (SBP) reported, External debt and liabilities had moved up by $500 million to $106.3 billion in the prior quarter closed on June 30, 2019.
However, the number expanded $10.2 billion in the preceding year as it had been at $96.1 billion on 30,9, 2018, the report said.
Arif Habib Limited Head of Research Samiullah Tariq narrated the debt saga to a private news channel. He said, “The increase in external debt and liabilities (of $600 million) in the last quarter is insignificant. This is a welcome development.”
The extent of the entire external debt at $106.9 billion was, nevertheless, not insignificant. “This is huge,” he stated.
Furthermore, Pakistan paid a sum of $3.07 billion in external debt and loan servicing in July to September 30, 2019, as per the state bank.
Total debt reparations comprised $2.66 billion public debt.
Besides, additional debt payments were given about public sector companies, bank financing and the private sector.
The country acquired comparatively a meagerer amount despite a notable debt payment in the Jul-Sept 2019 part.
“A notable drop in the current account deficit – which shows the gap between government’s foreign income and expenditure – played a pivotal role in shaping things in Jul-Sept,” Tariq stated.
Additionally, the current account deficit decreased by 64% to $1.54 billion in the first quarter of Fiscal year 20. In contrast, the current account deficit shrank $4.28 billion in the same quarter of the previous year.
Consequently, Pakistan’s foreign currency reserves developed around $1.3 billion to $8.5 billion by November 7 contrasted to $7.2 billion on June 30.
“The improvement is much better than the borrowed amount of $600 million,” he said.
The economy has begun to stabilize as proposed by the enhanced current account deficit and foreign currency assets.
“Government’s role starts here. It needs to play an active role in increasing exports and attracting foreign direct investment. This way, its reliance on the external debt will lessen,” Tariq said.
“The $106.9-billion external debt and liabilities are huge when compared with the (size of) our economy,” he noted.
“If we failed to attract investment for boosting exports and substituting imports, then we may again encounter a balance of payments crisis in future,” Tariq warned.
The way forward
Besides, economic administrators should aid local and foreign businesses. They need to ensure ease of doing business; streamline taxes for the rapid growth.
The total external debt and liabilities of Pakistan however, dropped in connection with the gross domestic product (GDP). The ratio sank to 38.3% of GDP in the Jul-Sept 2019 quarter contrasted to 45% in the prior quarter ended June 30, 2019.
Pakistan needs to increase its foreign currency earnings on war-footings. Moreover, the country needs to increase its foreign direct investment (FDI).
The ongoing financial crises is an eyeopener for the state. Pakistan needs to take pragmatic steps to curb this economic menace.