Pakistan's Ballooning Debt: A Financial Tightrope

Pakistan faces mounting pressure with a scheduled USD 30.35 billion in foreign debt and interest payments for the financial year. Despite a drop in the debt-to-GDP ratio, rising yearly repayments demand strategic economic planning to increase foreign income and manage external expenditures effectively.

Pakistan's central bank has announced a staggering USD 30.35 billion to be repaid in foreign debt and interest payments this fiscal year, escalating concerns over the country's financial stability. The repayments stretch from August 2024 to July 2025, including crucial loans typically rolled over by bilateral creditors.

Despite a decrease in the debt-to-GDP ratio to 20.2% by August 2024—down from 27.6% the previous year—the total repayments have risen compared to the USD 21.2 billion paid in the past 12 months. The debt surge is linked to new loans from Saudi Arabia, UAE, and IMF, alongside existing financial commitments.

To manage its growing financial burden, Pakistan will need to implement robust strategies to boost foreign income and reduce external expenditures through measures like import substitution. This approach, advocates say, could enhance the nation's ability to navigate the looming repayment landscape and strengthen foreign exchange reserves.

(With inputs from agencies.)