KARACHI: The government plans to raise $6.5 billion in the medium term (FY16-19) to pay off its external debt maturities.

This includes raising a total of $4bn through Eurobonds in the next four years besides using other debt tools.

Recently the Debt Policy Coordination Office (DPCO) published Medium-Term Debt Management Strategy (2015-16 to 2018-19) while Topline Research outlined the main features of the strategy.

The objective of the document is to list sustainability of Pakistan’s total public debt by focusing on short- to medium-term maturity profile and ways of refinancing these maturities.

“After analysing the document, we have reached following salient conclusions: 1) Maturity of external debt is not as large as being speculated; 2) Pakistan’s total debt and debt servicing are on a declining trend, which is contrary to general perception,” said the report of Topline.

Repayment of external debt is expected to remain around $4-5bn in the medium term (FY16-19) and lower still in the long term (going out to 2040), as per the document.

Even though this only includes public debt and does not include external debt servicing of Public-Sector Enterprises (PSEs) and the private sector, it is lower than the latest IMF balance of payments forecast which lists an average annual debt servicing of around $7bn in the medium term.

The document forecast government’s debt level projected for June 30, 2016. However, domestic debt level projected for June 30, 2016 of Rs12.7 trillion is lower than January 31, 2016 level of Rs13.1tr, showing that actual year-end figures are likely to be higher than projected. External debt is projected to increase to $52bn, up by around $1.1bn.

A foremost yardstick for measuring debt sustainability is debt servicing as percentage of total revenues.

For FY15, servicing of public debt was Rs1.6tr, which was 40 per cent of total revenues of Rs3.9tr. This is in line with the trend of previous years where this has averaged around the same. Furthermore, the document states that ideally this ratio should be below 30pc.

Published in Dawn, March 23rd, 2016