Pakistan Has to Return $10 Billion in Foreign Debt in Current Fiscal Year

The Minister for Economic Affairs Hammad Azhar has informed the National Assembly that the government would return over $10 billion foreign debt during the current fiscal year.

Replying to various questions during Question Hour, the minister said,

The incumbent government returned $8.39 billion foreign debt from August 18, 2018 to June 30, 2019.

He said that Pakistan’s foreign debt on August 18, 2018, was $73.1 billion. The past government had obtained short term loans during the last two years of its tenure which had to be returned.

The minister said the stock of outstanding external debt of Pakistan till May 2019 was Rs. 10,838 billion. In order to resolve economic issues, the government is introducing a comprehensive set of economic and structural reforms focusing on export, re-establishing fiscal stability and improving governance in key utilities and state-owned enterprises.

Regarding devaluation of the rupee, Hammad Azhar said that the recent movement in exchange rate reflected the resolution of macroeconomic imbalances accumulated over the past few years when the rupee was kept overvalued.

The increased demand for imported goods led to a widening of current account deficit to unmanageable levels, putting severe pressure on the country’s foreign exchange reserves.

As a result of the demand-supply gap in the foreign exchange market, the rupee depreciated by 13.7 percent in FY 18 and 24.1 percent in FY 19.

Pakistan’s current exchange rate regime is flexible and market-determined. The State Bank, however, is committed to addressing disorderly market behavior, he added.

To another question, he highlighted that the debt to GDP ratio had exceeded its limit during the tenure of the past government. However, he said that the incumbent government is making efforts to bring it down to the prescribed limit.

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