Islamabad: Pakistan is expected to repay more than $23 billion in external debt obligations during the current fiscal year, according to sources familiar with the matter.
Of this amount, approximately $12 billion comprises deposits held in two different categories, with hope that friendly nations will grant rollover agreements to avoid immediate repayment. The remaining $11 billion includes debt service payments owed to multilateral organizations, bilateral creditors, international bondholders, and commercial lenders.
A significant concern is the upcoming maturity of Eurobonds, with a $500 million repayment scheduled for September 2025 and a $1 billion Eurobond due in April 2026. The $1 billion Eurobond issued in 2021 was launched at a 6% interest rate for five years, while the 2015 Eurobond of $500 million was issued at an 8.25% rate for ten years.
Overall, the total external debt servicing requirements for the public sector are projected at around $15 billion, which includes $4 billion in deposits from China, maintained by the Ministry of Finance and the Economic Affairs Division, and approximately $9 billion managed by the State Bank of Pakistan (SBP). These include loans from the IMF, foreign deposits, and other bilateral and multilateral obligations.
Key bilateral deposits include $5 billion from Saudi Arabia, $2 billion from the UAE, approximately $1 billion from Qatar, and $700 million from Kuwait.
The government faces potential risks if bilateral creditors refuse rollover agreements, which could impact the liquidity situation.
Additionally, Pakistan’s debt-to-GDP ratio has been affected by inflationary pressures, leading to fluctuations in nominal GDP figures and potentially worsening the debt burden in the coming months.
The government is exploring options for issuing new international bonds, such as Panda bonds or Sukuk, but higher global interest rates and increased country risk premiums pose challenges. The possibility of launching Eurobonds at rates approaching 10% faces domestic resistance amid a polarized political environment.