KARACHI, May 16: Pakistan’s external debt recorded a big rise of $1.47 billion in nine months of this fiscal year. The total amount of external debt and foreign exchange liabilities combined also registered an increase of $1.365 billion during this period. The foreign exchange liabilities as such rather declined from $1.951 billion at end-June 2004 to $1.846 billion at end-March 2005. These liabilities include mainly foreign currency deposits in Pakistan’s banking system, special US bonds launched after the May 1998 nuclear tests and deposits raised from other central banks.
The external debt rose from $33.307 billion at end-June 2004 to $34.777 billion at end-March 2005 and external debt and liabilities combined went up from $35.258 billion to $36.623 billion. Data posted on the State Bank website show that foreign debt increased mainly because of a build up in medium and long-term debts i.e. one-year and longer tenure debts.
The stock of such debts rose from $29.853 billion at end-June 2004 to $31.354 billion at end-March 2005. Within the medium and long-term debts, multilateral debts or debts obtained chiefly from the World Bank and the Asian Development Bank showed the fastest growth. The stock of such debts surged from $14.349 billion at end-June 2004 to $15.461 billion at end-March 2005.
Between July 2004 and March 2005, the World Bank approved $300 million for poverty reduction in Pakistan, $21.5 million for polio eradication and $102.9 million for tax administration. It also approved $100 million to enhance quality and access to education in Punjab, provided $123 million for rehabilitation and modernization of Taunsa Barrage on the River Indus and offered $300 million to support the development of the banking sector in Pakistan.
The ADB approved $301m for improving road networks in NWFP and $200 million for boosting health, education and water and sanitation services in Punjab. The SBP data show that the second largest component of medium and long-term external debt i.e. debts obtained from the Paris Club countries rather declined from $13.558 at end-June 2004 to $13.438 billion at end-March 2005.
The Paris Club creditors include Austria, Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russian Federation, Spain, Sweden, Switzerland, the United Kingdom and the United States. This apparently small reduction of $120 million in the debts obtained from the Paris Club countries is encouraging because nine out of 19 countries in the club use euro as their national currency and the stock of debts obtained from these countries should have gone up in dollar terms due to the appreciation of the euro.
The euro gained around 6.5 per cent against the US dollar between July 2004 and March 2005. As the pound sterling also rose 4.2 per cent against the dollar during July-March 2004-05, this also should have increased the stock of the UK debts in dollar terms.
The data show that the stock of debts raised through sovereign and special purposes bonds rose from $824 million at end-June 2004 to $1.266 billion at end-March 2005. This mainly reflects the issuance of $600 million Islamic bonds or Sukuk in January 2005, as Pakistan continued to pay return on the debts raised earlier through euro bonds and special purposes bonds.
Military debt and commercial loans of longer than one year maturity also decreased from $204 million to $195 million and from $198 million to $182 million during July-March 2004-05. But short-term external debt or debts with less than one year maturity (obtained from the Islamic Development Bank) shot up from $22m at end-June 2004 to $233 million at end-March 2005.
All the above-mentioned debts, clubbed together as publicly guaranteed debts, overall rose from $29.875 billion at end-June 2004 to $31.587 billion at end-March 2005. Private non-guaranteed debts, on the other hand, decreased from $1.67 billion to $1.433 billion during this period. The stock of the IMF loans also declined slightly from $1.762 billion at end-June 2004 to $1.757 billion at end-March 2005.
