Pakistan’s External Debt Stocks Jumped 8% in 2020: World Bank

The World Bank has estimated Pakistan’s total external debt stocks at $108.530 billion by the end of 2020 compared to $100.831 billion by the end of 2019.

The World Bank, in its latest report “International Debt Statistics 2022”, stated that for Pakistan, the 8 percent increase in external debt stocks reflected the inflow of budgetary support from official bilateral and multilateral creditors and rollover and new credit lines from commercial banks.

According to the data, total external debt stocks stood at $4108.530 billion by 2020 including the use of IMF credit of $8.902 billion against $8.097 billion in 2019 and long-term external debt of $92.398 in 2020 against $83.208 billion in 2019. Short-term external debt stood at $7.230 billion in 2020 compared to $9.526 billion in 2019.

According to the data, external debt stocks to export was 390 percent in 2020 compared to 324 percent in 2019, external debt stocks to GNI was 42 percent in 2020 compared to 37 percent in 2019, debt service to exports was 33 percent in 2020 compared to 3 percent in 2019, short term to external debt stocks was 7 percent in 2020 compared to 9 percent in 2019, multilateral to external debt stocks was 31 percent in 2020 compared to 30 percent in 2019, gross national income (GNI) was 258,005 in 2020 compared to 272,612 in 2019.

The report further noted that in South Asia, debt to China has risen, from $4.7 billion in 2011 to $36.3 billion in 2020, and China is now the largest bilateral creditor to the Maldives, Pakistan, and Sri Lanka. In South Asia, the external debt stock of Bangladesh rose 19 percent driven by a 32 percent rise in public sector debt owed to bilateral creditors resulting from the implementation of large infrastructure projects.

There was a wide divergence in the rate at which external debt accumulated in individual DSSI-eligible countries, including the group’s largest borrowers. The combined external debt stock of the 10 largest DSSI-eligible borrowers (Angola, Bangladesh, Ethiopia, Ghana, Kenya, Mongolia, Nigeria, Pakistan, Uzbekistan, and Zambia) was $509 billion at end-2020, 12 percent higher than the comparable figure at end-2019 and equivalent to 59 percent of the external debt obligations of all DSSI-eligible countries combined. They also accounted for 65 percent of the end-2020 private non-guaranteed external debt of DSSI-eligible countries.

The report stated that multilateral creditors provided 60 percent of net long-term external debt inflows to DSSI-eligible countries. Net long-term debt inflows to DSSI-eligible countries rose 25 percent in 2020 to $71 billion from $57 billion in 2019 to the highest level of the past decade. This increase was driven by the extraordinary level of support provided to the world’s poorest countries by multilateral institutions led by the IMF and the World Bank.

Net inflows from multilateral institutions to DSSI-eligible countries rose 74 percent in 2020 to $42 billion, equivalent to 60 percent of 2020 net debt inflows of external public and publicly guaranteed debt from all creditors. The IMF and World Bank combined accounted for 70 percent of the 2020 inflows from multilateral institutions. Inflows from bilateral creditors fell 19 percent to $10 billion, from $12.5 billion in 2019.

The inflows from bondholders fell to $4 billion, close to half the 2019 level, and the decrease was due to tightening of market conditions in 2020, which raised borrowing costs and limited market access for most DSSI-eligible countries. Net inflows from other private creditors rose 15 percent in 2020 to $14 billion but were highly concentrated and also reflected rollovers and extension of new credits by commercial bank loans to Pakistan in the context of the IMF program.

The report also noted that FDI inflows to Pakistan fell moderately to $1.9 billion, 5 percent below the 2019 level, cushioned by continued investment in power generation and the telecom sector from British and Chinese investors.

In contrast, in Bangladesh, where FDI is concentrated in export-oriented garment manufacturing, inflows fell 21.4 percent in 2020 to $1 billion as $3 billion worth of export orders, largely from the United States and European Union, were canceled. In the Maldives, where FDI is concentrated in tourism and several new hotel complex projects were postponed, the contraction in inflows was severe. They fell 63.6 percent in 2020 to $348 million from $956 million in 2019.

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