Pakistan needs to repay USD 77.5 billion in external debt from April 2023 to June 2026 to China and Saudi Arabia, according to a renowned US think tank.
If the cash-strapped government defaults on these payments, it may face disruptive consequences. According to a research published on Friday by the United States Institute of Peace (USIP), Pakistan is facing the prospect of default due to its large foreign debt obligations, even in the face of surging inflation, political disputes, and increased terrorism.
Pakistan is on the verge of a severe economic crisis, with considerable external debt, a depreciating local currency, and rapidly diminishing foreign exchange reserves, the report stated.
According to USIP research, Pakistan’s external debt repayment of USD 77.5 billion from April 2023 to June 2026 is a “hefty amount” for a USD 350 billion economy. It claimed that if Pakistan defaults, it will cause a “cascade of disruptive impacts”.
The report recommends that debt-ridden countries must make significant repayments to Chinese financial institutions, private creditors, and Saudi Arabia during the next three years.
According to the analysis, Pakistan faces near-term debt payback strain from April to June 2023, with an external debt servicing burden of USD 4.5 billion. In June, a Chinese SAFE deposit of USD 1 billion and a Chinese commercial loan of around USD 1.4 billion will need to be paid back.
The sources claim that Pakistani authorities are attempting to convince the Chinese to refinance and roll over both liabilities, citing previous instances in which the Chinese government and commercial banks have done so.
Even if Pakistan meets these obligations, the next fiscal year will be more difficult because debt servicing will increase to over USD 25 billion, according to the research.
Pakistan is still waiting for USD 1.1 billion in IMF aid, which was supposed to be disbursed in November of last year. Pakistan and the IMF have been negotiating the program's restoration for months but have been unable to reach an agreement.
Latest Business News
