Pakistan is facing a looming risk of default as it has to repay foreign debt and interest worth approximately $22 billion in the next 12 months. The government, after successfully resuming its IMF program, plans to renegotiate its foreign debt as its debt obligations exceed its expected inflows in the upcoming years.
The State Bank of Pakistan (SBP) reports that the country will repay a total of $21.95 billion, including $19.34 billion in principal and $2.60 billion in interest. However, the Pak-Kuwait Investment Company (PKIC) data shows that the central bank has not projected any foreign debt inflows for the next 12 months.
Tariq suggested that the government should focus on boosting domestic revenue, reducing imports, and increasing exports in order to address its financial crisis. He also emphasized the importance of improving the investment climate to attract foreign investment and increase foreign inflows.
The government should also consider seeking assistance from friendly countries, as well as multilateral institutions such as the IMF, to help alleviate the debt burden, Tariq added.
Tariq added that the government needs to be careful in its approach to increasing foreign exchange reserves and boosting the confidence of overseas Pakistanis. He suggested that the government should restructure its existing debt, enter a new IMF program after the current one ends in June 2023, reduce imports, increase export earnings, and increase workers’ remittances through official channels.
Tariq also mentioned that former finance minister Miftah Ismail was in favor of taking new loans instead of restructuring the current debt. He hopes that the nation will successfully revive the stalled IMF loan program after the ongoing talks in Islamabad.