Pakistan’s central bank has announced that the country will be repaying a staggering $30.35 billion in maturing foreign debt and interest payments during this financial year. This figure represents a substantial increase compared to previous years, highlighting the mounting pressure on Pakistan’s economy.
The $30.35 billion includes repayments on significant loans rolled over annually by bilateral creditors. Over the 12-month period from August 2024 to July 2025, Pakistan is expected to repay $26.48 billion in maturing foreign debt and an additional $3.86 billion in interest expenses.
While these payments are secured under the recent $7 billion Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF), the rising repayment burden raises concerns. Despite Pakistan’s debt-to-GDP ratio dropping to 20.2% in August 2024 from 27.6% in the same month of the previous year, the nation’s economic managers, planners, and parliamentarians face a critical task: finding ways to boost foreign income and curtail external expenditures.
The substantial increase in repayment obligations is directly linked to new loans received from Saudi Arabia, the UAE, and the IMF in late June and July 2023. These loans, totaling around $4 billion, combined with an additional $2 billion loan from the IMF between August 2023 and April 2024, have amplified the repayment pressure in the coming years.
Despite the looming debt challenge, some analysts are cautiously optimistic. Topline Research, citing IMF documents, suggests that Pakistan’s gross external financing requirement for the current fiscal year (July 2024 to June 2025) has dropped to a nine-year low of $18.8 billion, excluding expected rollovers and a contained current account deficit.
However, Pakistan is also expected to secure additional foreign loans in the range of $3 billion to $4 billion during the current fiscal year. To alleviate the repayment pressure, experts are recommending a two-pronged approach: increasing foreign income through export growth and import substitution, and reducing external expenditures by controlling imports. These measures would help improve Pakistan’s capacity to meet its external payment obligations and bolster its foreign exchange reserves.