Pakistan faces a significant challenge with foreign debt repayments reaching $30.35 billion in FY25. The upcoming year (August 2024 – July 2025) will require Pakistan to make these repayments, including interest on maturing loans and annual rollovers from bilateral creditors.
The latest figures from the State Bank of Pakistan (SBP) reveal that the country will need to repay $26.48 billion in principal payments. An additional $3.86 billion will be needed for interest payments, adding to the mounting economic burden.
The rise in debt is partly attributed to fresh loans received in late 2023. Saudi Arabia, the UAE, and the IMF collectively provided about $6 billion in new funding, adding to the existing repayment pressure. The SBP data projects that the country will need to pay an average of $3 billion per month from November 2024 to July 2025.
Despite this debt burden, the country’s financing requirements have dropped to a nine-year low. As per the latest IMF documents, Pakistan’s gross external financing needs stand at $18.8 billion for FY25, compared to an average of $25 billion over the last nine years. This figure excludes expected rollovers and reflects the containment of the current account deficit (CAD).
In terms of the debt-to-GDP ratio, Pakistan’s foreign debt has shown a decline, falling to 20.2% in August 2024 from 27.6% in August 2023. This improvement is partly due to economic expansion in FY24 after a contraction in FY23.
The government and SBP must also focus on reducing external expenditures through import substitution, enhancing export potential, and attracting targeted foreign investments. These measures are crucial to improving Pakistan’s capacity to manage external debt and rebuild foreign exchange reserves.
