Cash-strapped Pakistan owes $77bn to China, Saudi Arabia, needs to repay by 2026: Report

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As Pakistan continues to struggle economically, a report by the prominent Washington-based think tank, United States Institute of Peace (USIP), said that the cash-strapped country needs to repay a whopping $77.5 billion in external debt from April 2023 to June 2026. The report published on Thursday (April 6) also warned that Islamabad could face “disruptive effects” if it ultimately defaults. 

Pakistan is currently facing soaring inflation at 35.37 per cent which is the highest in over five decades while prices of essential food items such as wheat flour, sugar, and edible oil rose significantly. Meanwhile, the country is also facing political conflicts and rising terrorism, said the report, warning that it is at risk of default due to its massive external debt obligations. 

According to the USIP report, in the next three years, the debt-stricken country has to repay a number of Chinese financial institutions, private creditors and Saudi Arabia. Between April to June, this year, Islamabad faces near-term debt repayment pressure as the external debt servicing burden is at $4.5 billion, said the report. It added that Pakistan has to repay $1 billion to the Chinese SAFE deposit and another loan of around $1.4 billion from Chinese commercial is also due to mature. 

The US-based think tank, in its report, also suggests that Pakistani officials are hoping to convince the Chinese to not only refinance but also roll over both debts, adding that they have managed to do so before. However, even if they do pull it off this time as well, the next fiscal year for Pakistan would be more challenging as the debt servicing will reportedly rise to nearly $25 billion.

The short-term debt repayments include $4 billion to Chinese SAFE deposits, $3 billion to Saudi deposits and $2 billion to United Arab Emirates (UAE) deposits, said the report, adding that the “Pakistani government assumes they will be rolled over by the creditors each year.” Separately, Pakistan also needs to repay another $1.1 billion of long-term commercial loans to Chinese banks, said the USIP. 

As of December 2022, Islamabad also holds external debt and liabilities of $126.3 billion, at least 77 per cent of this debt, which amounts to around $97.5 billion, is directly owed by the government of Pakistan to various creditors. 

Meanwhile, Pakistan also continues to struggle with securing the $6.5 billion bailout package the International Monetary Fund (IMF) approved in 2019 which also expires in June this year. However, Pakistan and the IMF have been negotiating the programme’s resumption for months but are yet to reach an agreement.

(With inputs from agencies) 


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