Pakistan faces USD 21.5 billion in external debt repayments in FY27

Pakistan faces external debt servicing obligations of USD 21.5 billion in fiscal year 2026–27, including USD 17.5 billion in principal and USD 4 billion in interest, with a substantial portion expected to be managed through rollovers and refinancing, according to the State Bank of Pakistan (SBP).

SBP Governor Jameel Ahmad said around USD 7.3 billion in bilateral principal repayments is expected to be rolled over, while approximately USD 3.2 billion in bilateral commercial loans is being refinanced.

Together, the two amounts total approximately USD 10.5 billion. Roughly half of the commercial loan amount has already been repaid and refinanced, he said.

How much external debt does Pakistan still need to repay?

The governor estimated Pakistan's net external debt repayments for FY27 at around USD 10 billion. Approximately USD 5 billion has already been repaid, leaving about USD 5.5 billion outstanding for the remainder of the fiscal year.

Rollovers allow Pakistan to extend the repayment dates of existing loans, while refinancing involves taking new financing to replace maturing debt.

These arrangements help reduce the amount Pakistan must repay immediately, although the underlying obligations remain.

Ahmad said Saudi Arabia had rolled over USD 3 billion in deposits, with the relevant documentation being processed.

Pakistan considers another Eurobond issuance

The Ministry of Finance has issued requests for proposals for another Eurobond issuance, although the timing will depend on Pakistan's financing needs and the borrowing terms available in international markets.

The governor said Pakistan was prioritizing longer-maturity borrowing at more favorable interest rates.

He added that recent proposals for short-term borrowing had been rejected because of their high costs and short repayment periods.

What did the governor say about the rupee?

Ahmad said Pakistan's real effective exchange rate (REER), calculated using an index based on 2010, does not by itself establish the actual value of the rupee.

REER measures the rupee's value against a basket of trading partners' currencies after accounting for differences in inflation.

The governor said the exchange rate continued to be determined by market forces.

He added that the SBP was focused on strengthening the foreign exchange market by narrowing the gap between interbank and open-market exchange rates, reforming exchange companies and curbing currency smuggling and illegal hundi and hawala transactions.

The central bank is also monitoring trade-based money laundering.

Pakistan's SBP-held foreign exchange reserves have increased to approximately USD 21.5 billion from less than USD 3 billion in early 2023, Ahmad said.

How are higher oil prices affecting Pakistan's external outlook?

The SBP has raised its oil price assumption by USD 10 per barrel since the previous Monetary Policy Committee meeting, taking it to nearly USD 90 per barrel.

The revised estimate reflects prevailing prices and trends in the oil futures market.

Higher oil prices increase the cost of Pakistan's energy imports, adding pressure to the country's external payments.

The central bank now expects the current account deficit for FY27 to be slightly above the midpoint of its projected range of 0% to 1% of gross domestic product.

Previously, the SBP had expected the deficit to remain near the lower end of that range.

The revised outlook reflects the additional pressure that higher global energy costs could place on Pakistan's external finances.