IMF Expects Pakistan’s External Debt to Cross $128 Billion in 2024-25

The International Monetary Fund (IMF) has projected Pakistan’s external debt to reach $128.228 billion in 2024-25 up from $124.828 billion in 2023-24.  The Fund in its latest report on Pakistan stated that the country’s external debt is projected to further increase to $132.929 billion in 2025-26. External debt is project to decrease to 31.3 percent of GDP for 2024-25 compared to 32 percent of GDP in 2023-24, but projected to further increase to 31.5 percent of GDP in 2025-26  Pakistan’s domestic debt has been projected at Rs. 54.787 trillion for 2024-25 and Rs. 60.355 trillion for 2025-26 against the estimated Rs. 47.160 trillion in 2023-24.  The Fund stated that despite some improvement in fiscal year 2024, Pakistan’s public debt remains very high, its tax-to-GDP ratio low compared to peers and its development needs, leaving a narrow path to ongoing debt sustainability.  The overall risk of sovereign stress is high, reflecting a high level of vulnerability from elevated debt and gross financing needs and low reserve buffers.  Elevated gross financing needs continue to pose high risks to debt sustainability, particularly as fiscal and reserve buffers are very low. In this regard, timely disbursements of committed bilateral and multilateral support is critical in the period ahead. Higher-for-longer interest rates, a prolonged stagnation due to tight macro policies, renewed pressures on the exchange rate, possibly policy reversals, and contingent liabilities related to SOEs pose significant risks to debt sustainability, the Fund added.