December 4, 2003	Thursday	Shawwal 9, 1424

KARACHI, Dec 3: Pakistan spent $866 million in July-September this year on external debt servicing and on clearing its foreign exchange liabilities.

According to the data available on the State Bank website, the country made $768 million debt servicing in the first quarter of this fiscal year. It also cleared $98 million forex liabilities.

After making this debt servicing and clearing foreign exchange liabilities Pakistan now has only $550 million stock of rolled- over forex liability. Senior bankers say this would reduce the cost of carrying over forex liabilities and improve the country’s balance of payments.

Of the $768 million spent on debt servicing, $605 million were used for repaying the principal amount of external loans and $164 million for interest payments. The total debt servicing includes $414 million spent on servicing public and publicly guaranteed debts and $207 million spent on private non-guaranteed debts.

Senior bankers say the payment of private debts also included some pre-payments. The SBP had allowed this to help companies take the benefit of a weaker dollar and to ward off ill effects of excessive foreign exchange inflows. In July-September this year, the government also repaid $147 million to the IMF that formed part of the total debt servicing of $768 million.

Out of the $98 million spent on clearing forex liabilities, $47 million went to the holders of the special US dollar bonds. Here again the central bank had allowed premature encashment of the bonds taking advantage of the excessive inflows of foreign exchange — primarily through workers’ remittances.

The forex liabilities payments also include $27 million on foreign currency loan bonds of the National Highway Authority and $6 million on interest payments against $550 million deposits mobilized in the past from some central banks. And a $5-million final interest payment against $500 million deposits mobilized by National Bank from the Bank of China also formed part of the $98 million used for clearing foreign exchange liabilities.

After making $866 million payments in debt servicing and on clearing forex liabilities the total stock of Pakistan’s external debt and forex liabilities stood at $$35.462 billion at end- September — slightly down from $35.474 billion at end-June 2003.

But interestingly whereas the foreign exchange liabilities fell to $2.078 billion at end-September from $2.122 billion at end-June, the stock of external debt inched up to $33.384 billion from $33.352 billion during this period.

Pakistan plans to pre-pay $1 billion expensive external loans during this fiscal year, which should substantially reduce its stock of these loans at end-June 2003.

The country wants to repay $1 billion expensive loans of the World Bank and the Asian Development Bank in advance to reduce its cost of servicing these debts. The government is also making moves to lower its cost of raising domestic debts.

The net impact of the reduced cost of local and external debts would be that the government would be able to free up more resources for financing development projects that have received little attention — and keep its fiscal deficit within limits.

In the last fiscal year, the government had to spend a huge sum of $4.349 billion on external debt servicing and on clearing forex liabilities. This was more than the amount sent back home by overseas Pakistanis — a record $4.2 billion.