KARACHI: The State Bank is not considering restructuring bilateral debts, Governor Jameel Ahmed said at a briefing for analysts on Monday after announcement of the monetary policy.

“In fact, the State Bank is not even aware about the restructuring of external debt. This means the government has not worked out such plan,” said Tahir Abbas, the head of research at Arif Habib Limited, after attending the meeting.

Finance Minister Ishaq Dar had said on Saturday that the government was working on the possibility of restructuring its bilateral debt.

The finance minister may have been referring to the rollover and extension of the tenure of bilateral debts, some of the analysts who attended the meeting said.

Pakistan owes a total of $9 billion to just three countries — $4bn to China, $3bn to Saudi Arabia and $2bn to the UAE. “Each year this amount is rolled over and the government negotiates with these governments for the rollover,” said Mr Abbas.

He said an extension in the rollover tenure was likely. Currently a rollover takes place every year. The country can negotiate with governments to roll over the debt for two or three years.

Since Pakistan has to pay interest on these bilateral loans, there is a possibility of extension in their tenure.

“The extension of tenure will certainly provide breathing space to the government at a time when it is struggling to avoid a default,” Tahir Abbas said.

Pakistan will have to pay $25bn as debt servicing every year. Out of this, $9bn is bilateral and $5bn is owed to multilateral agencies like the World Bank and the Asian Development Bank.

“This leaves us with $11bn — a manageable sum given that the country receives $28bn in remittances,” said the analyst.

Published in Dawn, June 13th, 2023