$10Bn Debt Repayment Due by July for Pakistan
Saad khan 
Islamabad: Pakistan's central bank reports that the country faces a significant foreign debt obligation of $10 billion due in June and July 2024, putting pressure on the government to seek loan rollovers and arrange timely financing.
Optimus Capital Management Head of Research Maaz Azam noted that Pakistan borrowed $3 billion from Saudi Arabia and the UAE between June and July last year. Following this, the first $1 billion tranche of the IMF loan in July 2023 increased foreign exchange reserves to around $8 billion from $4 billion in June 2023. The $4 billion multilateral and bilateral assistance received in June and July 2023 might be part of the potential rollover and repayment in June and July this year.
“In June 2024 alone, we have to repay around $6.7 billion in principal debt, of which around $4 billion is expected to be rolled over,” Azam projected. Pakistan also expects to secure the next IMF loan program of $6-8 billion for three to four years during June-July 2024. This bailout is crucial for ensuring foreign debt repayment and supporting economic activities through import financing.
According to the State Bank of Pakistan (SBP) and JS Global Research data, Pakistan must repay and roll over a total of $27.52 billion from May 2024 to April 2025. The government had to repay $1.72 billion in May 2024. In June and July 2024, it will have to repay and roll over $10.21 billion. Additionally, Pakistan faces a foreign debt obligation of $15.59 billion from August 2024 to April 2025. The total debt obligation includes $23.95 billion in principal repayment and $3.57 billion in interest costs.
Azam stated that the government is negotiating with the IMF for a new loan program after the standby arrangement of $3 billion concluded in April 2024. This new IMF program is expected to ensure loan rollovers and repayments for the next three to four years. However, the IMF’s conditions, such as increasing energy tariffs, rupee depreciation, and elevated interest rates, will strain economic activities amid limited foreign exchange reserves.
Some economists oppose the new loan to avoid increasing inflation and poverty and demand a homegrown economic roadmap. However, delaying the loan increases the risk of default on foreign debt and pressures the rupee against the dollar and other currencies. The IMF projects the Pakistani currency will depreciate to Rs329 against the dollar in 2024-25 compared to the current Rs278/$. The government, however, projects the rupee-dollar exchange rate at Rs295/$ for the FY25 budget.
