Debt management

THE finance ministry’s new three-year, medium-term debt management strategy aimed at raising long tenor foreign official and commercial loans and securing debt relief from commercial creditors is a tad optimistic, despite the agreement with the IMF on a $3bn short-term facility. The plan seeks to meet Pakistan’s external financing needs through long tenor bonds and concessional multilateral flows as it attempts to reduce the increasing share of short-term loans in the foreign debt stock. It emphasises efforts for fresh commercial loans in three-year or longer rollover tenures, instead of the existing one-year tenures to increase the average time to maturity of debt. The scheme proposes debt relief from commercial creditors to slash the annual external repayment burden of $22bn-23bn. The strategy assumes that the agreement will immediately unlock held-up foreign inflows. Indeed, the programme’s approval by the IMF board later this month will help Pakistan secure assistance from its global partners to boost liquidity and support its repayment capacity.