KARACHI, Aug 16: Pakistan spent $2.716 billion on servicing its foreign debts in the last fiscal year ending June 2005, according to data released by the State Bank. In the budget estimates for the last fiscal year presented along side the budget for the current fiscal, Pakistan had estimated its cost of domestic and foreign debt servicing at Rs301.6 billion -— the largest single head of its budgetary expenses. The latest data on foreign debt servicing suggests that about Rs161.6 billion of this amount went to external debt servicing (the amount being equal to $2.716 billion with the US dollar approximately valued at Rs59.50 in the last fiscal year).

This means that foreign debt servicing in FY05 consumed 53.5 per cent of the resources spent on domestic and external debt servicing combined.

But foreign debt servicing of $2.716 billion in FY05 was far lower than that of $4.969 billion in FY04. The SBP data show that during the last fiscal year, the central bank made a draw down on its own foreign exchange reserve for servicing $1.821 billion external debt servicing, which made up two-third of total foreign debt servicing. The remaining one-third of the external debt was serviced using the resources of banks.

Out of the $2.716 billion spent on foreign debt servicing, $1.893 billion or roughly 70 per cent of the total was used for repaying the principal amount of debt and $823 million or about 30 per cent for paying interest on the debt. In FY04, Pakistan had cleared more of the principal debt rather than paying interest on them. It had spent $4.089 billion or more than 82 per cent of the total foreign debt servicing of $4.969 billion on repaying principal amount of debt and only $880 million or less than 18 per cent on payment of interest.

In FY05, Pakistan’s foreign debt rose to $34.037 billion up $730 million from $33.307 billion in FY04.

The debt servicing of $2.716 billion in FY05 means the country had to spend an amount equal to about eight per cent of the total external debt on the debt servicing. In FY04, the debt servicing of $4.969 billion was equal to around 15 per cent of the total foreign debt.

That points to a healthy trend in external debt management. That is Pakistan has made it a point to retire those debts first that are more expensive.

In FY05, the country also spent $249 million on servicing foreign exchange liabilities. The amount was far lower than its foreign liabilities servicing of $305 million a year earlier. In FY05, Pakistan was carrying 1.797 billion worth of foreign exchange liabilities in addition to its foreign debt. The amount was slightly lower than its forex liabilities of $1.951 billion in FY04.

Forex liabilities include special dollar bonds, foreign currency bonds, deposits of foreign central banks in Pakistan, Bank of China deposits with the National Bank of Pakistan and foreign currency swaps.