By Staff Reporter
KARACHI: Pakistan’s debt burden is easing, with the debt-to-GDP ratio falling to 70 percent in FY24, as nominal GDP growth outpaces debt expansion, and external debt metrics also showing signs of improvement.
“External Debt to GDP has fallen to six-year low in FY24 at 26 percent of GDP from 32 percent in FY23 due to relatively lower increase in foreign currency borrowings than local currency,” brokerage Topline Securities said.
“This ratio indicates how much a country’s export revenue will be used up in servicing its debt, thus how vulnerable the payment of debt service obligations is to an unexpected fall in export proceeds.”
The external debt-to-exports ratio, a key indicator of debt servicing vulnerability, has decreased to 253 percent in FY24 from a peak of 314 percent in FY20, suggesting improved export proceeds utilization.
However, the external debt servicing-to-FX reserves ratio remains elevated at 195 percent for FY24, indicating that short-term debt repayments are still a significant portion of the country’s reserves.
The report expects this ratio to decline to 89 percent in FY25E, assuming external debt repayments of $10 billion (net of rollover) and average FX reserves for the year.
“We have taken external debt repayments at $10 billion (net of rollover) for FY25 in line with the SBP (central bank) guidance and reserves for all years we have taken as average of beginning and end of the year,” the brokerage says.
Meanwhile, the central government debt stock increased 1.6 percent to a record Rs68.9 trillion in June, driven by a surge in short-term domestic borrowing.
The central bank reported that total debt rose by Rs1.1 trillion from May, with external debt edging up 0.7 percent to Rs21.8 trillion. Domestic debt climbed 2.1 percent to Rs47.2 trillion, led by a significant increase in short-term debt to Rs10.2 trillion. Long-term domestic debt rose 0.6 percent to Rs36.8 trillion.
In contrast, liabilities in Naya Pakistan Certificates declined 3.1 percent to Rs84 billion.
The latest data highlights the country’s growing reliance on short-term domestic borrowing, which has driven the country’s debt stock to new highs.
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