Foreign debt servicing touched $8.16b during FY 2016-17

Karachi: The State Bank of Pakistan on Thursday reported that the country’s foreign debt servicing amounted to $8.16b during financial year 2016-17, registering a 53pc from 2015-16.

Pakistan paid $6.54b in principal and $1.62b in interest during FY 2016-17, said SBP. During first quarter of 2016-17, debt servicing payments amounted to $1.55b, second quarter $1.25b, third quarter $2.43b and last quarter $2.92b.

Pakistan’s foreign debt servicing could increase for FY 2017-18, as Pakistan’s commercial borrowing has witnessed an increase recently. Around $4.4b loans were obtained at commercial rates, to maintain the foreign exchange reserves of SBP.

Forex reserves witnessed a decline of $4.64b during October 2016 and September 15th, 2017. According to another SBP report released on Thursday, SBP’s reserves declined $474m to $14.28b during September 8th-15th.

This highlights the fact that commercial borrowing didn’t help in cushioning the forex reserves, but helped avert a major slide of them.

Pakistan’s trade deficit touched record highs of $12.1b for FY 2016-17, although on a positive note, the first month of new FY 2017-18 saw a rise in remittances, foreign direct investment and exports.

Trade deficit for July-August further widened to over $6b, which indicates the poor balance of trade.

According to experts, a major increase in debt servicing could severely impact the exchange rate in the future.

Pakistan is set to borrow $500 to $1b by issuing an Islamic sukuk bond in the international markets very soon.

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