State Bank of Pakistan Governor Jameel Ahmad has said that Pakistan’s total outstanding debt for FY25 stands at $26.2 billion.

Pakistan has secured significant debt relief from its friendly nations, allowing it to manage its external debt obligations more effectively.

At a National Assembly Standing Committee meeting, these friendly countries will roll over more than $16 billion in loans, leaving Pakistan with only $10 billion to repay by the end of the next fiscal year (June 30, 2025).

In the current fiscal year (FY24), the State Bank of Pakistan (SBP) has already paid $1.5 billion towards the country’s external debt, with $8.5 billion remaining for the rest of the fiscal year. Looking back, in the previous fiscal year (FY23), the SBP paid $12.5 billion, while the country’s total external debt reached $130 billion.

The Finance Secretary, Imdad Ullah Bosal, also informed the committee that Pakistan will receive its first tranche from the International Monetary Fund (IMF) following a $4.4 billion rollover of Chinese commercial loans.

Additionally, the government has secured a one-year extension in loan rollovers from Saudi Arabia and the United Arab Emirates, with the SBP Governor stating that $12.3 billion in deposits from these countries will be rolled over in the current fiscal year.

While the Finance Secretary acknowledged that the budgetary measures are likely to increase inflation, he expressed optimism that the external sector will remain manageable this fiscal year due to the debt rollovers from the friendly countries.

The central bank governor acknowledged that taming domestic inflation remains a significant challenge for the Pakistani economy. He projected that inflation is expected to rise to 13.5% due to the impact of budgetary measures and higher energy prices. The governor cautioned that rising wheat prices and potential conflicts in the Middle East could further exacerbate inflationary pressures.

However, the governor expressed optimism that inflation rates would stabilize between 5-7% starting from the next fiscal year.

Looking at the foreign exchange reserves, the governor stated that these could increase to $13 billion by the end of the current fiscal year. The governor also outlined a five-year plan to stabilize the economy through a multi-pronged approach. This includes controlling the current account deficit, maintaining sufficient foreign exchange reserves, and achieving financial stability and transparency.

To boost the economy, the governor emphasized the need to increase domestic exports by 10-15%. He also mentioned efforts to reduce the gap between the open market and interbank dollar exchange rates, as well as to prevent illegal activities like Hundi (informal money transfer) and dollar smuggling.

Despite the high interest rates necessary to control inflation, the governor was optimistic that the policy rate would fall as the economy stabilizes and inflationary pressures subside.

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