[Zain Abbass]

http://www.dawn.com/....e-years--bi-10
External debt to rise by 43pc in five years
By Khaleeq Kiani
Monday, 11 Jan, 2010

ISLAMABAD Pakistan’s total external debt is likely to grow alarmingly by more than 43 per cent over the next five years, to about $73 billion in 2015-16 from about $50.76 billion early this year.

According a report released by the International Monetary Fund (IMF), the debt will increase by about 13 per cent, or $6.4 billion, to $57.1 billion by the end of the current fiscal year and is estimated to increase by $7 billion, or 12.3 per cent, to $64 billion by the end of the next fiscal year.

IMF’s estimate suggests that the external debt will increase by another $2 billion in 2011-12 and cross $72.6 billion in 2015-16.

The public and publicly guaranteed debts, including IMF loans, are estimated to increase by 45 per cent from $47.26 billion on June 30, 2009, to more than $68.1 billion in 2015-16. The amount will increase to $53.3 billion during the current fiscal year and $59.9 billion by end of next year.

The total medium- and long-term debt which stood at about $41.5 billion at the end of June last year, will increase to $48.2 billion next year and reach $67.6 billion in 2015-16 -- an increase of about 40 per cent.

The Asian Development Bank will have the single largest share in the external debt, which will increase from $9 billion in July last year to about $15.8 billion in 2015, by more than 75 per cent in five years.

The World Bank debt will increase by about 29 per cent from $12 billion to $15.5 billion by 2015.

Bilateral debt is likely to increase by 96 per cent from the current $16 billion to $31.28 billion in 2015-16.

However, the IMF believes that the country’s external loan is sustainable; the debt stock will remain moderate when compared with the size of the economy and external debt servicing will remain manageable.

The analysis is based on the forecast that the external debt stock which stands at 27 per cent of the GDP would peak at 34.3 per cent in 2011-12 and then start subsiding, to reach 31 per cent in 2015-16.

The estimates may change if underlying assumptions for economic growth, interest rate and external trade are not fulfilled.

The economic growth rate has been projected at three per cent this year, four per cent next year and 5.5 per cent in 2015-16.

An increase in debt takes place generally because of large fiscal and current accounts deficits, depreciation in exchange rate and uncontrolled borrowing.

In the medium term, such increases lead to a higher debt-servicing cost and restrict the government’s ability to improve the condition of the people.

[Zain Abbass]

Pakistan economic recovery picking up: IMF

Wednesday, February 17, 2010: Pakistan’s economic growth has started recovering despite security and energy challenges and the country met almost all targets under the International Monetary Fund program, the global financial institution said Tuesday.

“Pakistan’s program is progressing well,” the Fund said in a statement following “constructive discussions” with Pakistani officials focusing on Pakistan’s recent economic performance, the outlook for the rest of the fiscal year.

Adnan Mazarei, who met with the Pakistani officials in Dubai over the past week to initiate discussions on the fourth review under Pakistan’s Stand-By Arrangement (SBA), noted that Islamabad observed all quantitative performance criteria for end-December 2009, except for the budget deficit target, which was exceeded by a small margin.

Listing positive trends Pakistan registered in recent months, the Fund said the exchange rate has remained stable at Rs. 84 – 85 per U.S. dollar and the international reserves position has strengthened (the banking system’s gross foreign exchange reserves, including the State Bank and commercial banks, reached US$14.3 billion in mid-February, of this total the State Bank held US$10.5 billion).

The early signs of recovery in some sectors and the improved external position are encouraging, although there are risks and challenges to Pakistan’s economic program.

“Economic growth in Pakistan is starting to recover; large-scale manufacturing output has started to increase, the improvement in the global economy has helped manufacturing exports, and private sector credit growth has picked up somewhat as businesses rebuild their working capital.”

The IMF’s package for Pakistan - approved in November 2008-has been extended to $11.3 billion.

Looking ahead, the IMF statement said, a resumption of higher growth is needed to raise living standards and will require improvements in the business climate to stimulate higher investment by local and foreign investors.

The financial institution also noted that the “resolve of the Pakistani authorities to implement their stabilization and reform program is a key factor in deepening macroeconomic stabilization, despite the risks associated with internal security and uncertainty as to the pace of global economic recovery.”

Emphasizing the need for stepped up donors support for the key anti-terror partner of the international communityy, the Fund said early disbursement of donor financing remains crucial to support Pakistan’s stabilization and reform efforts and laying the basis for a high and sustainable growth.

The IMF mission staff will prepare a report on the fourth review under Pakistan’s SBA that is scheduled for consideration by the IMF Executive Board in late March.

N

[Boazdexter]

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