ISLAMABAD: On Wednesday, State Bank of Pakistan (SBP) Governor Jameel Ahmad provided a detailed update on the country’s economic outlook before the National Assembly Standing Committee on Finance and Revenue, chaired by MNA Naveed Qamar. Ahmad highlighted that the total outstanding debt payment for FY25 stands at $26.2 billion, with over $16 billion set to be rolled over by friendly nations. This leaves $10 billion to be settled by June 30 next year.
Ahmad noted that the central bank had recently paid $1.5 billion in debt, with $8.5 billion remaining to be paid by the end of the fiscal year. He revealed that in FY24, $12.5 billion was paid in debt servicing, while the country’s external debt has reached $130 billion.
Finance Secretary Imdad Ullah Bosal confirmed that Pakistan is expected to receive its first IMF tranche following the rollover of $4.4 billion in Chinese commercial loans. Additionally, the government has secured a one-year extension on loan rollovers from Saudi Arabia and the UAE.
Ahmad assured that the $12.3 billion in deposits from China, Saudi Arabia, and the UAE will provide relief for FY25. Despite this, he cautioned that inflation is projected to rise to 11.5% in FY25, with the possibility of reaching 13.5% due to budgetary measures and energy prices. Rising wheat prices and potential global oil price increases could also contribute to inflation.
He mentioned that measures are being taken to manage inflation, with expectations for it to range between 5% and 7% in the future. The country’s foreign exchange reserves have reached $9.1 billion after last month’s debt payment and could increase to $13 billion by the end of the fiscal year.
Addressing concerns about high interest rates, Ahmad explained that the policy rate is expected to decrease as the economy stabilizes. He outlined the central bank’s five-year plan, which focuses on controlling the current account deficit, ensuring foreign exchange reserves cover three months of imports, and achieving financial stability and transparency.
Ahmad acknowledged that GDP growth has been modest at 3.5% over the past decade and emphasized the need to boost domestic exports by 10% to 15%. He also noted efforts to close the gap between open market and interbank dollar exchange rates and combat dollar smuggling.
Despite a recent reduction in the interest rate to 19.5%, MNA Azhar Kiani pointed out that it remains 6% higher than the inflation rate, increasing government interest payments. Ahmad defended the high interest rates as necessary to control inflation.
