ISLAMABAD: Pakistan needs to repay US$ 77.5 billion in external debt from April 2023 to June 2026, and the cash-strapped country could face an eventual default if it defaults, a prominent US think tank has warned. “Disastrous effects” may be experienced.
Amid skyrocketing inflation, political strife and rising terrorism, Pakistan could default on its huge external debt obligations, warned an analysis published on Thursday by the United States Institute of Peace (USIP). is facing the risk of default, JEE News reported on Friday.
Pakistan, which is currently struggling with a major economic crisis, is plagued by high external debt, a weak local currency and dwindling foreign exchange reserves.
The USIP report says $77.5 billion Pakistan needs to repay external debt from April 2023 to June 2026, which is a “huge amount” for the $350 billion economy.
It said that if Pakistan eventually defaults, there will be a “catastrophic cascade of effects”.
Over the next three years, the debt-ridden country must make huge payments to Chinese financial institutions, private lenders and Saudi Arabia.
The report said that from April to June 2023, Pakistan faces the closest debt servicing pressure as the external debt servicing burden is USD 4.5 billion.
According to the report, substantial payments are due in June, when US$1 billion in Chinese safe deposits and about US$1.4 billion in Chinese commercial loans mature.
Pakistani officials hope to convince the Chinese to refinance and roll over both loans, which Chinese government and commercial banks have done in the past, the report said.
Even if Pakistan is able to meet these obligations, the next fiscal year will be more challenging as the debt provision will reach about US$25 billion, the report said.
Pakistan is awaiting a much-needed $1.1 billion bailout from the International Monetary Fund, which was originally supposed to be disbursed in November last year.
The funds are part of a US$6.5 billion bailout package approved by the IMF in 2019, which analysts say is crucial if Pakistan is to avoid defaulting on its external debt obligations.
The IMF program, signed in 2019, will expire on June 30, 2023 and the program cannot be extended beyond the deadline under the agreed guidelines.
Pakistan and the IMF have been in talks for months to revive the program but have yet to reach an agreement.
There are no easy solutions available to fix Pakistan’s ailing economy and the government maintains that it has taken all the tough decisions to revive the stalled IMF programme.
