Islamabad: The Ministry of Finance has said in a report issued under the framework of the International Monetary Fund (IMF) that Pakistan’s debt ratio is expected to come down from 70.8 percent to 60.8 percent in the next three years, however, economic slowdown, high interest rates and currency fluctuations pose a threat to debt sustainability.
The document stated that the debt system is expected to remain sustainable between 2026 and 2028. According to the report, Rs888 billion was saved in markup payments last year, but financing requirements are still at a high level of 18.1 percent.
According to the Ministry of Finance, 67.7 percent of Pakistan’s total debt is domestic while 32.3 percent is external debt.
The document said that 80 percent of the debt was taken at floating rates, due to which an increase in interest rates could further increase the debt burden.
Moreover, 24 percent of the debt is of short-term nature, which maintains refinancing risks.
According to the report, the floating external debt ratio is 41 percent, indicating a medium level of risk. The Ministry of Finance has warned that the widening current account deficit and dwindling foreign exchange reserves could increase debt servicing pressures.
According to officials, external shocks and climate change can also increase debt risks, so maintaining fiscal discipline and policy continuity is imperative.
