Chapte

er No. 9

Exter
E rnal a
 and 
Dome
D estic  Debtt

RODUCTION
9.1 INTR N path too recovery. Neet zero borrow
wing from thee SBP
at the end of everry quarter puut restraint ono the
The debt tolerance and d debt carryinng capacity vaary
governnment’s borroowing appetiite from the SBP
across reggions and cou untries. Develloping countrries
and thee governmentt successfullyy met this target in
like Pakiistan are mo ore vulnerablle to econom mic
the lastt two quarterss (October-March).
fluctuationns becausee of relattively weakker
macroeconomic fundaamentals. Theere is a need to
The suupport from thhe Internationnal Monetary Fund
analyze debt
d sustainability of succh countries on
is a keey impetus too this stabilizaation processs. The
periodic basis to determine
d shhock absorbiing
effects of the stabillization starteed accruing as
a the
capacity of
o the econom my. Thereforee, developments
currentt account haas recovered substantiallyy and
in both external
e and domestic deebt are of key k
hemorrrhage to foreiign exchangee reserves nott only
concern to debt manag gement. Exceessive increasses
arrestedd but around $3.4 billion have
h been addded to
in debt have caused problems
p for Pakistan in thet
the reseerves.
past, whille imprudent domestic borrrowing plaguued
the econnomy during g 2007-08. Vigilant deebt 9.2 EX
XTERNAL DEBT
D AND LIABILITIE
L ES
managem ment is requirred not only to ensure thhat
present deebt levels are kept under reestraint, but also
a Gross external
e debtt at a given point
p of time is the
to projecct consequen nces of futture repaymeent amount of disbursed and outstannding liabilities of
obligationns. Prudent debt manageement practicces residennts of a counntry to non-reesidents. Couuntries
could nott undermine the importaance of prudeent use extternal debt inn order to filll the gap bettween
fiscal annd monetary y policy. Evven best deebt desiredd expenditurre levels and a domesttically
managem ment may not by itself avert any upheavval availabble resourcees. Governm ments also issue
in case off poor macroeeconomic poliicy sequencinng. foreignn currency debt
d in ordeer to signal their
commiitment to stabble exchange rates
r and pricces. A
The curreent fiscal yeaar carried the legacy of hiigh key inccentive for goovernments tot use foreignn debt
fiscal andd current acccount deficiits. Large tw win heavilyy is that it minimizes
m currrent interest costs,
deficits, high
h inflation,, a depreciatinng currency and
a but dooing so leavves the counntry vulnerabble to
dwindlingg reserves were
w all lingering problems certain risks.
carried over
o from the previouus fiscal yeear.
Depreciattion of the Rupee
R againstt the US dolllar The goovernment maanages its debbt in order too raise
has causeed substantiaal rise in fooreign currenncy the reqquired amounnt of resourcces subject to t the
denominaated public debt.
d On thee internal froont, lowest possible medium to loong-term costt and
borrowingg from the State Bank of Pakisttan consisttent with a prrudent degreee of risk. Poorr debt
continues to fuel incrreases not onnly in domesstic manageement poses risks for booth the publicc and
inflation but
b also addin ng to the shoort-run domesstic privatee sectors in thhe form of ecoonomic instabbility,
debt. Thee governmentt embarked upon u a plan of insolveency, debt disstress, and fisscal crisis. In order
Economicc Stabilization to regain macroeconom
m mic to prevvent such evenntuality, a goovernment neeeds to
stability. The measurees taken undeer this prograam identifyy the variouus risks to itts debt stockk, and
by the govvernment hav ve placed the economy on the t formulate strategiess to counter or minimize these

1
139
Economic Survey 2008-09

risks. Risks can be classified into two main burden. Even though total External Debt &
categories; market risk, and country specific risk. Liabilities (EDL) was rising throughout the period,
The stock of outstanding debt of any country is the growth of the economy was far greater than
vulnerable to market risks regardless of the origin, growth of the debt stock, leading to a reduction in
size, average tenure, and other characteristics of the debt burden. In absolute terms, EDL increased
the debt. Market risk is measured in terms of from US $ 37.9 billion at end-June 2000, to $ 46.3
potential increases in debt servicing costs billion by the end of June 2008. During the same
associated with changes in market conditions such period, EDL as a percentage of GDP decreased by
as interest rate risk, exchange rate risk, and credit 24 percentage points of GDP, falling from 51.7
risk. Country specific factors include the percent to 28.1 percent by end-June 2007 as shown
economic, social, and political stability of the in Fig-9.1. However, the last two years have seen
country, and general investor sentiment about the an increase in the rate of growth of EDL, as
economy. external debt and liabilities have been increasing
not only in absolute terms, but also as a percentage
Fig-9.1: External Debt & Liabilities of some major economic indicators. This shift in
3 8 .0
(% of GDP) momentum has highlighted the crucial role played
3 6 .0
3 6 .1 by current account deficit and exchange rate
3 4 .0 3 2 .7
stability on a country’s debt burden. Pakistan
3 2 .0
2 9 .5 3 0 .2
benefited from fiscal discipline imposed in the
3 0 .0
2 8 .3 2 8 .1
beginning of the decade as well as a relatively
2 8 .0
stable rupee and significant foreign inflows all of
2 6 .0
which facilitated a reduction in the debt burden.
2 4 .0

2 2 .0
However, deterioration of these same fundamentals
2 0 .0
is responsible for the increasing debt burden seen
in the last two years. Measures taken in order to
2004

2005

2006

2007

2008

2009*

* End M arch
steer Pakistan towards economic recovery have
meant that the country’s stock of outstanding EDL
has taken a hit. Entering into the International
In addition to risk management, governments need
Monetary Fund Stand By Arrangement (IMF SBA)
to constantly monitor, sustain, and even enhance
program has enabled Pakistan to shore up foreign
their debt carrying capacity. Furthermore, the
exchange reserves and prevent the economy from
borrowed resources must be utilized effectively
any further depreciation, but it has also translated
and productively so that they generate economic
into a significant increase in outstanding external
activity. Prudent debt management is therefore,
debt. Focusing on the absolute increase in the
essential for preventing debt crisis. Empirical
outstanding stock of EDL can be misleading for
evidence suggests that external debt slows growth
two main reasons. Firstly, the outstanding stock of
only if it crosses the threshold level of 50 percent
debt must be analyzed in relation to the size of the
of GDP or in net present value terms, 20-25
economy and its repayment capacity (in terms of
percent of GDP. Pakistan has experienced serious
GDP and other macroeconomic indicators).
debt problems in the recent past and accordingly
Secondly, the absolute change in EDL neglects
witnessed deterioration in the macroeconomic
classification between an actual increase in stock
environment, leading to deceleration in investment
and increases caused by fluctuations in
rate and economic growth and the associated rise
international exchange rates.
in the incidence of poverty.

The beginning of the current decade saw a

sustained reduction of Pakistan’s external debt

140
Table-9.1: Pakistan: External Debt and Liabilities
End-June
2004 2005 2006 2007 2008 2009*
(In billions of U.S. dollars)
1. Public and Publically Guaranteed debt 29.94 31.08 32.90 35.35 40.24 40.48
A. Medium and long term(>1 year) 29.91 30.81 32.73 35.32 39.53 39.75
Paris club 13.63 13.01 12.79 12.69 13.93 13.66
Multilateral 14.35 15.36 16.82 18.69 21.58 21.84
Other bilateral 0.69 0.81 0.92 1.00 1.19 1.94
Euro bonds/Saindak Bonds 0.82 1.27 1.91 2.71 2.67 2.15
Military debt 0.20 0.19 0.13 0.08 0.04 0.01
Commercial Loans/credits 0.22 0.18 0.17 0.15 0.12 0.17
B. Short Term (<1 year) 0.02 0.27 0.17 0.03 0.71 0.73
2. Private Non-guaranteed Debt (>1 yr) 1.67 1.34 1.59 2.25 2.89 3.30
3. IMF 1.76 1.61 1.49 1.41 1.34 4.19
Total External Debt (1 through 3) 33.4 34.0 36.0 39.0 44.5 48.0
Of Which Public 31.3 32.1 33.9 36.5 40.7 43.8
4. Foreign Exchange Liabilities 2.0 1.8 1.6 1.5 1.8 2.2
Total External Debt & Liabilities (1 through 4) 35.3 35.8 37.6 40.5 46.3 50.1
(In percent of GDP)
Total External Debt (1 through 3) 34.1 31.1 28.2 27.3 27.0 28.9
1. Public and Publically Guaranteed debt 30.6 28.4 25.8 24.7 24.5 24.4
A. Medium and long term(>1 year) 30.5 28.1 25.7 24.7 24.0 23.9
B. Short Term (<1 year) 0.0 0.2 0.1 0.0 0.4 0.4
3. IMF 1.8 1.5 1.2 1.0 0.8 2.5
Total External Debt 34.1 31.1 28.2 27.3 27.0 28.9
4. Foreign Exchange Liabilities 2.0 1.6 1.2 1.0 1.1 1.3
Total External Debt & Liabilities (1 through 4) 36.1 32.7 29.5 28.3 28.1 30.2
Memo:
GDP (in billions of U.S. dollars) 98.0 109.5 127.4 143.0 164.4 166.1
* End March Source: State Bank of Pakistan

9.2.1 Outstanding External Debt and Liabilities depressed economic growth and massive
depreciation of rupee against dollar partially
During the first nine months of the current fiscal
explains this increase in EDL as a percentage of
year 2008-09, Pakistan’s total external debt
GDP.
increased from $ 46.3 billion at end-June 2008 to $
50.1 billion by end-March 2009 — an increase of
The big chunk of Pakistan’s outstanding external
US $ 3.8 billion or 8.2 percent. A high and
debt is classified as public and publically
persistent current account deficit implies greater
guaranteed debt and accounts for 78.9 percent of
financing requirement by the economy. A global
the total outstanding EDL stock [See Table 9.2].
environment plagued by the economic slowdown
Out of the remaining amount 8.4 percent debt is
has hampered non-debt creating inflows like FDI
owed to the IMF which is a leap forward from last
and in constricted availability of the non-debt
year’s stake of 3.1 percent of total EDL mainly due
creating inflows; the government has to resort to
to disbursement of the first two trenches of the
multilateral and bilateral sources for its financing
Stand By Arrangement (SBA). Private non-
requirement and thus leading to the stock of
guaranteed debt contributes 6.6 percent to the stock
outstanding external debt. In relative terms, EDL
of EDL and another 4.3 percent contribution came
as percentage of GDP increased from 28.1 percent
from foreign exchange liabilities.
at end-June 2008 to 30.2 percent by end-March
2009— an increase of 2.1 percentage points. This
is the highest ever rise in a single year for almost
one decade [See Table-9.1]. A significantly
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Economic Survey 2008-09

Table 9.2: Structure of EDL (End-March 2009) 9.2.1.ii IMF Debt

Component Percent
In November 2008, Pakistan entered into a
Public and Publicly Guaranteed 78.9
Paris club 27.2
23-month stand-by loan agreement with the IMF.
Multilateral 43.5 The total financing approved by the IMF is
Other bilateral 3.9 approximately $ 7.6 billion. The objective of the
Short Term 4.3 agreement is to support the stabilization program
Private Non-Guaranteed 6.6 of the government. The first tranche of $ 3.1
IMF 8.4 billion was released in November 2008, and after a
Foreign Exchange Liabilities 4.3 successful first review of the program, a second
Memo: tranche of approximately $ 847 million was
Total EDLs 100.0 disbursed by the end of March 2009. In the
* EDL: External Debt and Liabilities Source: SBP absence of non-debt creating inflows the SBA has
provided much needed funds required to stabilize
The following section highlights the developments the economy by bridging the financing gap.
in the various components of EDL during the first However, the financing provided by the IMF is
nine months of the outgoing fiscal year. also the major reason behind the increase in the
stock of outstanding EDL. Between June 2008 and
9.2.1.i Public and Publicly Guaranteed Debt March 2009, the outstanding IMF debt stock piled
up from $ 1.34 billion to $ 4.19 billion. This
Public and publicly guaranteed debt accounts for
implies a whopping net addition of $ 2.85 billion.
the largest share of 78.9 percent in EDL. This
The increase in the stock of IMF debt is
component is further classified into medium to
responsible for 78 percent of the total increase in
long-term debt and short term debt. During the first
outstanding EDLs.
nine months of 2008-09, public and publicly
guaranteed debt has increased by 0.6 percent or $
9.2.1.iii Private non-guaranteed debt and
233 million, rising from $ 40.2 billion at end-June
Foreign Exchange Liabilities
2008 to $ 40.5 billion by end-March 2009.
Medium and long-term debt increased marginally The share of private non-guaranteed debt in
by $ 54 million during the same period. Out of Pakistan’s total EDLs has historically been very
multilateral debt, Paris club debt registered a slight small. Continuing with this trend, private non-
reduction of $ 273 million, and the stock of guaranteed debt accounted for 6.9 percent of the
outstanding Paris club debt is currently at $ 13.6 outstanding stock of EDL by March 2009. The
billion. Repayment of $ 500 million on account of stock of private non-guaranteed debt increased by
a Eurobond issued by the government in 2004 $ 412 million; rising from $ 2.89 billion in June
caused a reduction in the outstanding stock of 2008 to $3.3 billion by end-March 2009. This
Eurobond debt. Military debt also registered a category consists of private non-guaranteed loans
slight decrease of $ 34 million. The stock of worth $ 3 billion and non-guaranteed private sector
multilateral debt increased by $ 252 million, rising bonds worth $ 275 million.
from $ 21.6 billion at the end-June 2008 to $ 2I.8
billion by end-March 2009. Short term debt 9.2.1.iv Foreign exchange liabilities are
increased from $ 713 million at end-June 2008 to $ persistently declining since 1999 but witnessed a
728 by end-March 2009. This increase of $ 15 slight increase in 2008-09 on account of higher
million is on account of short term financing level of Central Bank Deposits received from
provided by the Islamic Development Bank (IDB). friendly countries which are increasing for a
The first nine months of the current fiscal year second consecutive year. The outstanding stock of
have seen a very limited amount of new foreign exchange liabilities increased from $ 1.8
disbursements of Public and publicly guaranteed billion at end-June 2008 to $ 2.2 billion by end-
debt, and most of the changes in outstanding stock March 2009. The increase is solely because of
are due to movements in international exchange receipt of $ 500 million from China in the Central
rates or disbursement from the IMF. Bank Deposits. The rise in Central Bank Deposits

142
 External Debt and Liabilities

has more than offset a decrease in Special $ Bonds $2,844.6 million from multilateral sources during
and Foreign Currency Bonds. Foreign exchange 2007-08. Disbursement from the bilateral and
liabilities now account for 4.3 percent of total EDL multilateral sources amounted to $981.5 million
as compared to a share of 3.9 percent in 2007-08. and $2,315.8 million, respectively during July-
March, 2008-09.
9.3 Composition of Foreign Economic
Assistance 9.3.iv Project Vs Non-Project Aid
The total amount of foreign economic assistance There has been a significant change in the pattern
received in the first nine months of 2008-09 stood of commitments for the project and non-project
at $ 7,193 million. The composition of this aid. The share of project aid was 55.6 percent
assistance is as follows: during 2007-08 which reduced to 45.4 percent by
July-March 2008-09. The share of project aid in
9.3.i Commitments the total commitments has declined as compared to
The commitments of foreign economic assistance non-project aid after 1990’s. Project aid was 71.5
were $3,570 million during 2007-08, while during percent and 71.7percent during the1980’s and the
the first nine months of the current fiscal year i.e., 1990’s respectively, compared to 42.8 percent
July-March 2008-09, total commitments amounted during 2001-09.
to $3,896 million. About 45.4 percent of the total
9.3.v Grants and Loans
commitments during July-March 2008-09 were in
the shape of project aid and 54.6 percent non- The composition of foreign economic assistance
project aid. The share of BOP/budgetary support has considerably changed over the years from
in total non-project aid was 90 percent, Non-food grants and grant-like assistance to hard-term loans.
(5 percent) and Afghan Refugees & earthquake The share of grants and grant-like foreign
relief assistance (4 percent). assistance in total commitments dropped from 80
percent during the First Five Year Plan (1955-60)
9.3.ii Disbursements
to 9 percent only during the year 2000-01. It,
Disbursement of foreign economic assistance however, surged again to 20 percent of total
during 2007-08 stood at $3,580 million but foreign aid contracted during 2001-02 but declined
decreased to $3,297 million during July-March, to 10.6 percent in July-March 2008-09
2008–09. During this period, disbursement for the
project aid amounted to $ 623 million or about 9.3.vi Debt Servicing during 2008-09
18.9 percent of the total disbursements. An amount
Debt inflows are useful in supporting a country’s
of $2,674 million was disbursed for non-project
balance of payments position and financing current
aid, claiming about 81.1 percent of total
account deficits. However, they pose an obligation
disbursements, comprising $ 308 million for Non-
to make payments in the future, thus producing a
Food aid, $2,306 million for BOP/budgetary
strain on the economy. The annual debt servicing
support and $59 million for Afghan Refugees &
payments made during the period 1999-2000 to
earthquake relief assistance.
2003-04 on average hovered around $ 5 billion per
9.3.iii Sources of Aid annum. Owing largely to a combination of re-
profiling of Paris Club bilateral debt on a long-
The major sources of foreign economic assistance
term horizon, the substantial write-off of the US
to Pakistan are Bilateral and Multilateral donors.
bilateral debt stock, the prepayment of expensive
Bilateral sources provided 37.8 percent during
debt and the relative shift in contracting new loans
2007-08 and multilateral 62.2 percent of the total
on concessional terms, this amount was drastically
commitments. Contribution of bilateral and
reduced to around $ 3 billion by 2007-08. As the
multilateral sources was 25.1 percent and 74.9
debt burden of an economy rises, so do the
percent of total commitments, respectively during
obligations to make debt service payments. An
July-March 2008-09. An amount of $735.9 million
amount of $ 3.65 billion has been paid during July-
was disbursed from the bilateral sources and
March 2008-09 which implies an increase of $ 650
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Economic Survey 2008-09

million in one year. Out of this amount, $ 2.83 thresholds provides insight into a country’s debt
billion was paid on account of repayment of position. They can be used to monitor the
principal amounts. A significant proportion of this sustainability of debt as well as an early warning
increase is due to repayment of Eurobond system for debt distress and sustainability issues.
amounting to $ 500 million made in February 2009 The indicators can be divided into two groups,
while $ 818 million were paid on account of nominal indicators which are useful in analyzing
interest payments. The amount rolled over the debt position at any given time as well as
increased from $ 1.2 billion in 2007-08 to $ 1.65 historical trends, and present value indicators
billion in July-March 2008-09 [See Table 9.3] which are useful in measuring current and future
debt payments. By using present value indicators,
Table-9.3: Pakistan’s External Debt and Liabilities it is possible to analyze future debt obligations in
Servicing current terms, and project the impact they will
($ Million) have on the country’s debt burden and
Actual Amount sustainability.
Years Amount Rolled Total
Paid Over
1999-00 3756 4081 7837 Table-9.4: External Debt Sustainability Indicators
2000-01 5101 2795 7896 EDL/ GDP EDL/ FEE EDL/ FER STD/EDL
Year
2001-02 6327 2243 8570 (Percent) Ratio (Percent)
2002-03 4349 1908 6257 FY00 51.7 297.2 19.3 3.2
2003-04 5274 1300 6574 FY01 52.1 259.5 11.5 3.7
2004-05 2965 1300 4265 FY02 50.9 236.8 5.8 1.4
2005-06 3115 1300 4415 FY03 43.1 181.2 3.3 1.2
2006-07 2977 1300 4277 FY04 36.7 165.0 3.0 0.6
2007-08 3161 1200 4361 FY05 32.7 134.3 2.7 0.8
2008-09* 3654 1650 5304 FY06 29.4 121.6 2.9 0.4
* July-March Source: State Bank of Pakistan FY07 28.3 122.6 3.0 0.1
FY08 28.1 124.3 4.2 1.5
FY09* 30.2 144.3 5.1 1.5
9.4 External Debt Sustainability Source: EA Wing and SBP Bulletins
* End March 2009
The idea of debt sustainability links the debt stock EDL: External Debt and Liabilities, FEE: Foreing Exchange
of a country to its repayment ability as gauged by Earnings, FER: Foreign Exchange Reserves, STD: Short-term
various macroeconomic indicators. The difference Debt.

between the total financing needs on the balance of

payments and the projected capital inflows is Most of the indicators of Pakistan’s debt have been
known as the financing gap. In crude terms, if the exhibiting a declining trend since 2001-02
financing gap is approaching zero in the long-term, onwards, with a trivial u-turn in the most difficult
debt is considered to be sustainable. Whereas if a year of recent economic history i.e. 2007-08,
financing gap exists, it can be filled by resorting to especially indicators that analyze debt in relation to
additional borrowing, rescheduling and debt foreign exchange reserves. Due to sustainable debt
reduction, or by accumulating arrears. Such policies and favorable rescheduling of debt,
measures lead to an escalating debt burden and external debt and liabilities (EDL) as a percentage
eventual un-sustainability of debt.
of GDP declined from 51.7 percent in end-June
In order to ensure sustainability, developing 2000 to 28.3 percent by the end of June 2007; a
countries can place limits on debt obligations, decline of 23.4 percentage points. Substantial
given the level of capital inflows. These limits are external debt inflows in 2007-08, magnified by
set by assigning threshold levels to the debt stock depreciation of the US dollar caused EDL to
as a ratio of economic indicators that represent the remain at 28.1 percent of GDP in the previous
repayment capacity of the economy, such as GDP, fiscal year. By end-March 2009, EDL as a percent
foreign exchange reserves and foreign exchange of GDP stood at 30.2 percent, increasing by 2.1
earnings. Calculation of these indicators and percentage points.
subsequent comparison with international
144
 External Debt and Liabilities

Fig-9.2: EDL as % of Fore ign Exchange Earnings

exchange reserves can be primarily attributed to a
300 sharp decline in the latter rather than an increase in
2 75 the stock of debt. Even though financing provided
2 50
by the IMF has assisted in stabilizing Pakistan’s
225
reserve position, foreign exchange reserves are
200

17 5
significantly lower than 2007-08 while the stock of
15 0
debt has been increasing at considerable pace.
12 5 Regardless of the origins of the increase, it must be
10 0 taken as a warning sign. Given the current
domestic and international financial environment,
* End M arch
any sustained increase in debt of the magnitude
observed during 2007-08 and 2008-09 needs to be
EDL as a percentage of Foreign Exchange in conjunction with a growth of reserves which
Earnings (FEE) gives a measure of a country’s guarantees the country’s capacity to repay the debt.
debt repayment capacity by comparing levels of Failure to match further increases in debt stock
external debt to the sum of exports, services with higher reserves will bring Pakistan’s level of
receipts, and private unrequited transfers. EDL as a external debt close to unsustainable levels.
percent of FEE stood at 297.2 percent by the end
of 1999-2000, and witnessed a sustained decline Pakistan’s level of Short Term Debt (STD) as a
till end-June 2006 where it reached 121.6 percent; percentage of EDL has historically been lower than
a reduction of 60 percentage points in 6 years. The most other developing countries. The previous
pendulum swung to other side and EDL in relation fiscal year 2007-08 has seen an increase in STD as
to FEE surged gradually in 2006-07 and 2007-08 a percentage of EDL to 1.5 percent as compared to
with EDL increased to 122.6 percent by end-June historical value of around 0.5 percent. This was
2007 and further to 124.3 percent by end-June due to an increase of $ 688 million in short-term
2008. The abrupt rise came in the period July- financing provided by the Islamic Development
March 2008-09, when it escalated to 144.3 percent Bank. STD-to-EDL ratio remains unchanged for
mainly because of very weak growth in foreign the first nine months of 2008-09. STD as a
exchange earnings and substantially higher net percentage of FER stood at 6.9 percent in March
debt inflows. The deterioration of this ratio 2009 as against 6.2 percent at end-June 2008. This
suggests that Pakistan’s stock of external debt and sustained increase is mostly due to a drawdown of
liabilities is growing at a faster rate than its foreign reserves as increase in short term debt (short-term
exchange earnings [See Table 9.4]. financing provided by the IDB) has been marginal.

As a proportion of Foreign Exchange Reserves Debt service as a percentage of GDP measures the
(FER), EDL witnessed a sustained decrease from extent to which a country’s output is absorbed by
1750 percent in 1999-2000 to 267.5 percent by payment of interest and principal on debt
end-June 2006-07. The improvement of this ratio obligations. This ratio has been steadily declining,
with the exception of 2003-04 where larger than
was due to a reduction in the stock of external debt
usual repayments including a $ 1.17 billion repaid
from 1999-2000 to 2003-04 coupled with a to the Asian Development Bank (ADB) caused the
significant increase in reserves. However, EDL as ratio to increase from 5.2 percent to 5.4 percent of
a percentage of FER has increased from 267.5 GDP for the past five years. Debt Service-to-GDP
percent by the end of 2006-07 to 407.3 percent in ratio declined from 8.6 percent in 2001-02 to 1.9
2007-08 and further to 510 percent by end-March percent by 2007-08. However, it reached 2.1
2009. This increase in debt as a ratio of foreign percent of GDP during July-March 2008-09. This
slight increase can be attributed to repayment of $
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Economic Survey 2008-09

500 million Eurobond in February 2009. As a the government’s stabilization program and a
percentage of FER, debt service declined from restoration of economic fundamentals, signs of
173.8 percent of FER in 1999-2000 to 19.7 percent recovery are visible, just as the global economy
of FER by 2006-07, but registered an increase to has exhibited momentum in the revival process.
26.7 percent of FER in 2007-08. This ratio has The government plans to continue to tap the global
significantly increased to 34.7 percent in the first capital markets, when conditions are more
nine months of 2008-09 due to depletion of foreign favorable, with the aim of establishing a
exchange reserves and higher debt service benchmark for Pakistan and to assure global
payments. An increasing ratio implies a growing investors of Pakistan’s commitment to the
strain on the economy’s resources to make development of its capital market. By regaining
payments on its debt obligations. Keeping in mind investor confidence and being active in
the maturity profile of additions to the debt stock, international debt capital markets, spreads on
the foreign exchange reserve position of Pakistan Pakistani paper can be narrowed, providing the
needs to be strengthened in order to prevent government with greater financing options.
repayment difficulties in the future.
9.5.i Recent Performance of 2017 and 2036
9.5 Pakistan’s Link with International Capital Eurobonds
Market
In line with developments in global debt capital
The crisis gripping financial markets worldwide markets, Pakistan has witnessed an increase in
has meant that capital flows have all but dried up. spreads on its 2016, 2017 and 2036 Eurobonds in
As uncertainty about risk prevails and investors the first nine months of FY09. Though some
look to shore up their losses, capital flows to stability has been regained due to initiatives taken
emerging markets have been curtailed. Sovereigns by the government and financing provided by the
have, in most cases, been deterred from new IMF, it has not been enough to overcome the
issuances by market sentiment and the increase in negative sentiment surrounding markets in general
costs. Global bond issuances in 2008 totaled $ 106 and the socio-political risk associated with
billion as compared to $ 184 billion in the previous Pakistan. In the absence of a credit rating upgrade
year. Sovereign issuances in Asia are also down by for Pakistan, as compared to the issue spread of
40 percent as Asian countries have been forced to UST + 200bps, the 2017 bond is trading currently
seek alternative methods of financing. Spreads on at a spread of UST +1504 bps, with the spread
emerging market sovereign bonds have also widening by 875 bps since 2007-08 [Table 9.5].
widened substantially, making access to financing
through capital markets, if available at all, very The 2036 bond, as compared to the issue spread of
costly. The Emerging Market Bond Index, a UST + 302bps and a spread of 507 bps last year, is
benchmark index for measuring the total return trading currently at a spread of UST + 1361 bps.
performance of international government bonds The 2036 bond was the longest ever tenor achieved
issued by emerging market countries, has increased by Pakistan. Both the 10 and 30 year offerings
by 400 bps in one year, implying an increase in
were debut offerings for Pakistan which extended
costs for tapping international debt capital markets.
the yield curve to 30 years in just 2 years. Most
As negative sentiments prevail, the situation for
Pakistan is compounded by weaker economic emerging market sovereign issuers have taken
performance in 2008-09 and a highly volatile longer time to extend their yield curve from 5 to 30
domestic security situation. The spread on years. It took Philippines 4 years and Brazil and
Pakistani sovereign bonds as given by the EMBI Turkey 3 years to lengthen their yield curve to 30
have gone up by 1550 bps and have a rating of years.
B3/CCC+. Given the severity of the crisis in
international markets, and hesitance with respect to
investor confidence, Pakistan has not issued any
new instruments in 2008-09. However, following

146
Table-9.5: Selected Secondary Market Benchmarks (as of May 2009)
Ratings Spread over UST Bid - Yield
Issuer Details (Coupon/Maturity)
(Moody’s/S&P) (bps) (%)
Pakistan B3/CCC+ 7.125%/Oct 2016 +1519 18.360
Pakistan B3/CCC+ 6.875%/Jan 2017 +1504 18.210
Pakistan B3/CCC+ 7.875%/Jun 2036 +1361 17.720
Colombia Ba1/BBB- 7.375%/Jan 2017 +461 6.08
Turkey Ba3/BB- 7.000%/Sept2016 423 6.61
Indonesia Ba3/BB- 6.875%/Mar 2017 411 8.03
Venezuela B2/BB- 8.500%/Oct 2014 639 17.45
Source: Bloomberg

9.5.ii Repayment of 2009 Eurobond least of which is the future obligation to make
th repayments. Increases in public debt can lead to
On the 19 of February 2009, the Government of
inflationary pressures on the economy if the source
Pakistan successfully repaid the maturing $ 500
of the increase is domestic borrowing. Excessive
million eurobond as well as $17 million on account
public sector borrowing may squeeze available
of interest payments. This successful payment laid
credit in the economy and have a crowding out
to rest any fears of Pakistan debt repayment
effect on the private sector which may lead to a fall
capacity, and shored up investor confidence about
in productivity. Additionally, increasing
Pakistan’s ability to successfully manage its
proportions of government resources directed
outstanding external debt obligations. The ability
towards debt servicing in the future hinder
to make successful repayments even under adverse
allocation of funds to other sectors of the economy.
conditions both domestically and in international
markets is testament to the resilience of the
Prudent management of public debt requires that
Pakistani economy.
fiscal operations be carefully planned, placing a
limit on present and future fiscal deficits in order
9.6 PUBLIC DEBT
to reduce borrowing requirements. Similarly, non-
Public debt refers to all debt owed directly by the debt creating foreign inflows need to be
government originating from domestic and encouraged to keep the foreign currency
external sources. It consists of debt denominated in component of public debt in check. Additionally,
Rupees as well as foreign currency. Public debt is exchange rate stability is crucial as depreciation of
directly linked to the government’s fiscal domestic currency increases the foreign currency
operations through the domestic component. The component of public debt significantly.
gap between a government’s resources, i.e. tax and
non-tax revenues, and its expenditure is mostly In the midst of the financial crisis and global
financed by mobilizing domestic debt instruments. economic slowdown, public debt burdens of most
The external position of an economy also countries have been increasing at a rapid pace.
influences the stock of public debt outstanding. Slowdown in economic activity has reduced the
External debt creating inflows acquired to finance amount of funds available on the one hand, while
current account deficits are reflected in the foreign unprecedented fiscal stimuli and recovery
currency component of public debt. packages have increased government expenditures
exponentially on the other. According to a recent
Management of public debt poses policymakers study by the IMF, “The increase in government
with key challenges and trade-offs. Debt is an debt ratios will be even more sizable. The debt-to-
essential tool in ensuring required levels of GDP ratio of advanced countries is expected to rise
investment and expenditure on programs aimed at by 14½ percentage points over 2008–09, the most
boosting productivity, economic growth, economic pronounced upturn in the last few decades. The
and social development, and the alleviation of one-year increase in government debt in 2009 is
poverty. However, accruing an excessive amount twice as large as that experienced during the 1993
of debt has dire consequences for any economy not recession. A third of this increase is due to

147
Economicc Survey 2008
8-09

financial sector suppo

ort packages. The debt raatio stock ofo public deebt. In such cases, wherre the
for the avverage of the emerging economies also increasse in debt is thought to be b a temporaary or
shows a sizable increease in 2009,, the first sinnce one-offf phenomenonn, there is litttle cause for alarm.
a
2002.” The
T y of responnses taken by
majority Debt sustainability
s can be mainntained as long as
advanced economies around the world to the t governnments are not on an exploosive debt patth, i.e.
current crisis
c have involved an a increase in borrowwing additional funds in order
o to fundd debt
expendituure, which haas led to an increase in the
t servicee obligations [see
[ Table 9.66].
Table-9.6:: Trends in Pu
ublic Debt
FY
Y02 FY03 FY04 F
FY05 FY066 FY07 FY08 FY
Y09*
(IIn billions of Rs.)
R
Domestic Currency
C Debtt 17715 1852 1979 2152 23222 2600 3209 3749
Foreign Cuurrency Debt 17795 1766 1810 1913 20411 2213 2692 3519
Total Publiic Debt 35510 3618 3789 4064 43633 4814 5901 72268
(In
n percent of GDP)
G
Rupees Deebt 399.0 38.4 35.1 33.1 30.55 30.0 31.2 228.6
Foreign Cuurrency Debt 400.8 36.6 32.1 29.4 26.88 25.5 26.2 2
26.9
Total Publiic Debt 799.8 75.0 67.2 62.5 57.22 55.5 57.4 5
55.5
(In percent
p of Revvenue)
Rupees Deebt 2775 257 246 239 212 200 214 1188
Foreign Cuurrency Debt 288 245 225 212 186 170 180 1
176
Total Publiic Debt 5662 502 470 452 398 371 394 3
364
(In percent of Totaal Debt)
Rupees Deebt 488.9 51.2 52.2 52.9 53.22 54.0 54.4 551.6
Foreign Cuurrency Debt 511.1 48.8 47.8 47.1 46.88 46.0 45.6 4
48.4
Memo:
Foreign Cuurrency Debt ($$ Billion) 299.9 30.6 31.3 32.1 33.99 36.5 40.7 4
43.8
Exchange Rate
R (Rs./U.S.$, E.O.P) 600.1 57.7 57.9 59.7 60.22 60.6 66.1 8
80.4
GDP (in Rs.
R Billion) 44402 4823 5641 6500 76233 8673 10284 133095
Total Reveenue (in Rs. Billion) 6224 721 806 900 10955 1298 1499 1995
* End-Maarch Source: SBP
S and EA Wing
W Calculatioons.

Pakistan hash been spaared from thee gravity of the t resourcces and exxpenditure, along withh the
current global
g crisis,, and the impact
i on the
t depreciiation of the rupee througghout the yeaar has
financial sector
s has beeen limited, waiving any neeed translatted to an incrrease in publicc debt.
for a stiimulus packaage or largee fiscal outlay.
However,, the previou us fiscal yeaar 2007-08 saw 9.6.i Total
T Outstaanding Pub
blic Debt
massive increases in the pubblic debt. A
Total public
p debt inncreased by RsR 1367 billiion in
deteriorating current account baalance, rapiddly
the firsst nine monthhs of 2008-099, reaching a total
depreciatiing currency and large subsidies
s in the
t
outstannding amounnt of Rs. 7268 billionn; an
face of oilo and otheer commodityy price shoccks
increasse of 23.2 peercent in nom minal terms. Total
resulting in substantiaal spike in thhe fiscal defiicit
public debt has beeen growing att an average of 12
translatedd to an incrrease in pubblic debt. The T
percentt per year sincce the fiscal year
y 1999-20000.
stabilizatiion program m implemennted by the t
governmeent in the currrent fiscal yeear 2008-09 anda
The inccrease in totaal public debt is shared bettween
the suppoort lent by th he IMF has arrested furthher
rupee and foreign currency debbt in the rattio of
widening of the curren nt account deeficit, shored up
40:60. The rise in foreign
f currenncy debt is mainly
m
foreign exxchange reserrves, and prevvented the rappid
because of massivee depreciationn of the Pak rupee
currency depreciattion. Theese positiive
in the first quarter of the fiscall year. In abssolute
developm ments have, however, taken t time in
terms $3.1
$ billion are
a added to the t public exxternal
materializzing, and th he persistentt gap betweeen
debt inn the period July-March
J 2
2009, howeveer, big

148
 External Debt and Liabilities

chunk of Rs. 246 billion has come from A look at some of the main factors behind the
depreciation. In the first nine months of 2008-09, surge in public debt over the last two decades
the depreciation of the rupee against the dollar has reveals some important structural follies. The rise
been responsible for approximately 18 percent appears to be largely contributed by the high real
addition to total increase in public debt and 30 cost of borrowing and stagnant government
percent to public external component. The rupee revenue. Total public debt consists of debt payable
has lost 20 percent of its value against the dollar in in rupees and debt payable in foreign exchange.
just nine months. The real cost of borrowing for these two
components of public debt is measured differently.
 
Figure-9.3: Publich Debt (In percent of GDP) [as shown in Table-9.7], the real cost of Pakistan’s
90 domestic debt has varied substantially over time.
79.8
The inflation is a crucial component in the
80
75.0 determinant of real cost of borrowing while
depreciation affects positively to real cost of
(In pecent of GDP)

70 67.2
62.5 borrowing on external debt. During the first five
60 57.2
55.5
57.4
55.5
years of the decade (2000-05), the real cost of
borrowing for domestic debt was 4. 2 percent
50
owing to lower inflation but in the last four years
40
(2005-09) the real cost of borrowing declined to
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09* negative 0.3 percent partly due to rising
* End March
Years inflationary pressures in the economy as well as
the declining nominal cost of borrowing.
The structure of public debt has also Table 9.7: Real Cost of Borrowing
experienced subtle changes since 2001-02. The (Percent)
focus has been shifted more towards domestic External Domestic Public
borrowings which inched up its share from Debt Debt Debt
48.9 percent in 2001-02 to 54.4 percent in 1980s 3.4 1.0 2.3
1990s 2.7 3.2 2.9
2007-08. The massive borrowing from the
1990-I -3.0 -1.9 -2.4
SBP has not only fueled inflationary pressures 1990-II -5.5 5.7 5.6
in the economy but also responsible for fiscal 2000-05 0.2 4.2 2.9
indiscipline resulting in dire consequences for 2005-2009* -2.7 -0.3 -0.9
debt management. The government has placed Source: EA Wing calculations
a restraint of net zero quarterly borrowing * Jul. 2005 - end Mar. 2009
from the State Bank of Pakistan (SBP).
During the first five years of the current decade
9.6.ii Dynamics of Public Debt Burden (2000-05), the real cost of borrowing for foreign
exchange denominated loan increased to 0.2
In order to view debt burden in relation to the percent mainly because of lower inflation and
resources of an economy and the government, it is rupee appreciation. However, it turned to negative
useful to analyze the debt burden in the context of 2.7 percent in the last four years (2005-09). During
other macroeconomic indicators. Changes in the 2004-09, the depreciation of rupee along-with
public debt burden of an economy are influenced higher inflation contributed to negative incidence
by the cost associated with borrowing funds, the of real cost of borrowing. The low implied cost of
rate of inflation, and the real growth rates of pubic external borrowing has contributed to overall
debt and government revenues. Periods of higher declining trend in real cost of borrowing during the
cost of borrowing coupled with higher growth rates last nine years.
of public debt in periods where growth of revenues
was relatively stagnant have yielded an increase in
the public debt burden.
149
Economic Survey 2008-09

As a result of the sharp fluctuation in the real cost borrowing, an implied interest rate is calculated as
of borrowing for both domestic and foreign debt, interest payments in 2007-08 divided by the stock
the dynamics of the growth in public debt also at the end of previous financial year. In the 2007-
changed over the last two decades. The changing 08 the real revenue witnessed modest growth of
dynamics of public debt is well-documented in 2.5 percent against 5.5 percent real growth in
Table-9.8. The economy generated primary fiscal public debt. Both revenue and public debt grew
surplus in the first five years (2000-05) owing to fractionally by 0.4 and 0.7 percent in 2008-09. An
lower interest payments in the period. However, it analysis of the dynamics of the public debt burden
turned into deficit in the period (2005-09). The provides useful lessons for policy-makers to
encouraging thing is that during 2008-09, the manage the country’s public debt. First, every
economy is going to generate modest primary effort should be made to maintain a primary
surplus of 0.5 percent of GDP. The real growth of surplus in the budget. Second, the interest rate and
debt registered an increase of 0.3 percent in 2000- inflation environment should remain benign. Third,
05 which accelerated to 1.4 percent in 2005-09. the pace of revenue growth must continue to rise to
The revenues kept healthy average growth rate of increase the debt carrying capacity of the country.
5.8 and 5.9 percent in these two time periods. The Center to all these lessons is the pursuance of
combined effect of healthy growth in revenues and prudent monetary, fiscal and exchange rate policies
modest growth in real debt growth resulted in a which are complementary in nature for prudent
sharp decline in the country’s debt burden during debt management in any country.
the last nine years. In order to assess the cost of

Table-9.8: Dynamics of Public Debt Burden

Primary Fiscal Real Cost of Real Growth Real Growth Real Growth of
Balance Borrowing of Debt of Revenues Debt Burden
(Percent of GDP) (Percent per year)
1980s -3.7 2.3 10.6 7.6 3.0
1990s -0.3 2.9 4.9 2.9 2.0
1990-I -1.8 -2.4 3.6 3.2 0.4
1990-II 1.1 5.6 6.2 2.5 3.7
2000-05 1.0 2.9 0.3 5.8 -5.5
2005-09* -1.1 -0.9 1.4 4.9 -4.5
Source: EA Wing calculations
* Jul. 2005 - end Mar 2009.

In order for the public debt to GDP ratio to 9.7 Domestic Debt
increase, the growth in public debt needs to exceed Domestic debt has always been fundamental part
the nominal growth of GDP. This implies that of a government’s borrowing strategy. A
inflation is a key factor in determining the government faces an inter-temporal trade-off
movements of this ratio. If the price level is high, between short-term and long-term costs that should
nominal GDP is inflated, and the accumulation of be managed carefully. Excessive reliance on short-
debt is outpaced by the nominal growth rate of term paper may leave a government vulnerable to
GDP. In inflationary times, real interest rates are volatile debt service costs in the event of rising
also lower, leading to a further reduction in the interest rates, and the risk of default in case a
debt burden. For 2008-09, the nominal growth rate government cannot roll over its debts at any cost. It
of GDP has been 28 percent, whereas growth in the may also constrain the central bank from raising
stock of public debt was 16.5 percent, leading to a interest rates to address inflation or support the
reduction in the public debt-to-GDP ratio by 1.9 exchange rate because of concerns about the short-
percentage points. term impact on the government’s financial
150
 External Debt and Liabilities

position. As in the case of Pakistan the SBP percentage points of GDP and augurs well in order
exercises its independence and hiked the interest to foster private investment, maintain fiscal
rates several times which proved too costly for sustainability and ultimately promote economic
servicing debt. On the other hand, over reliance on growth.
longer-term fixed rate financing also carries risks,
Figure-9.4: Structure of Domestic Debt
because it tempts governments to deflate the value (In percent of total domestic debt)

of such debt in real terms by initiating surprise 55

inflation. The government in the current fiscal year Unfunded Debt

45
benefited from enormous surge in inflation as debt-

(In percent)
to-GDP ratio went down instead of absolute 35 Floating Debt

nominal borrowing of just below half a trillion.

25

Over the medium term, a strategy for developing Permanent Debt

the market for government securities can relieve 15

FY09*
FY02

FY03

FY04

FY05

FY06

FY07

FY08
constraints and permit the issuance of a less risky
debt structure, and this should be reflected in the Financal Year

overall debt management strategy. In the 2007-08,

the failure of the debt management compelled to The composition of major components shaping the
borrow excessively from the SBP. The domestic debt portfolio has undergone a complete
diversification of domestic debt may also lessen transformation from a high dominance of unfunded
pressure on external borrowing as well. In this debt to an increasing dependence on floating
context, gradual increases in the maturity of new component of domestic debt. Since 2004, the
fixed rate domestic currency debt issues may raise unfunded category comprising about 45 percent of
cost in the short run, but they reduce rollover risk the aggregate debt stock has declined to 31.2
and often constitute important steps in developing percent of the total. The share of permanent debt
domestic debt markets. has also decreased over the same period and it
stood at 17.1 percent by end-March 2009 (See Fig
In Pakistan, borrowing from domestic and external -9.4). Contrary to this, the share of floating debt
sources account for almost same stake in overall increased by a whopping 26.2 percentage points in
debt. In fact, government has increasingly focused the period 2004 to March 2009. A detailed
on the domestic part over the last few years. This explanation of each section follows:
tendency is portrayed by a growing contribution of
domestic debt mainly because of non-availability 9.7.1.i Permanent Debt
of the external financing. The outstanding stock of
domestic debt accounts for 51.6 percent of total The stock of permanent debt consists of various
public debt by end-March 2008-09. medium to long term instruments at the
government’s disposal outside the National
9.7.1 Outstanding Domestic Debt Savings Scheme. These include Pakistan
Investment Bonds (PIBs), Prize Bonds, and Ijara
The total domestic debt is positioned at Rs 3758.6 Sukuk apart from such discontinued schemes as
billion at end-March 2009 which implies net Federal Investment Bonds. At the end of March
addition of Rs.541.4 billion in the nine months of 2009, permanent debt stood at Rs 660.4 billion,
the current fiscal year. In relation to GDP the exhibiting an increase of Rs. 43.7 billion or 7.1
domestic debt stood at 28.7 percent of GDP which percent up from the previous fiscal year [See
is lower than end-June 2008 level at 31.3 percent. Table-9.9].
The domestic debt grew by 16.8 percent which
lower than last years’ growth of 23.3 percent. The A large volume of the government’s
increase in domestic debt is lower than nominal
permanent debt originates from PIBs. The
GDP growth which helped reduction of 2.6
outstanding stock of PIBs stood at Rs 411.6
151
Economic Survey 2008-09

billion at the end-June 2008 and increased all the instruments classified under permanent
slightly by Rs 9.7 billion or just above 2 debt (with the exception of the Ijara Sukuk
percent to reach Rs 421.3 billion by end- which was introduced in 2009), followed by
March 2009. PIBs now represent 64 percent of Prize Bonds which increased by Rs 6.9 billion
the outstanding stock of permanent debt and to reach Rs 189.7 billion during the same
11 percent of total domestic debt. The stock of period.
PIBs also witnessed the largest increase out of

Table 9.9. Trends in Domestic Debt

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09*
(In billions of Rs.)
Permanent Debt 424.8 468.8 570.0 526.2 514.9 562.5 616.7 660.4
Floating Debt 557.8 516.3 542.9 778.2 940.2 1107.7 1589.6 1923.5
Unfunded Debt 792.1 909.5 899.2 854.0 881.7 940.0 1010.9 1174.7
Total 1774.7 1894.5 2012.2 2158.4 2336.8 2610.2 3217.2 3758.6
(In percent of GDP)
Permanent Debt 9.7 9.7 10.1 8.1 6.8 6.5 6.0 5.0
Floating Debt 12.7 10.7 9.6 12.0 12.3 12.8 15.5 14.7
Unfunded Debt 18.0 18.9 15.9 13.1 11.6 10.8 9.8 9.0
Total 40.3 39.3 35.7 33.2 30.7 30.1 31.3 28.7
(In percent of Total Debt)
Permanent Debt 23.9 24.7 28.3 24.4 22.0 21.5 19.2 17.6
Floating Debt 31.4 27.3 27.0 36.1 40.2 42.4 49.4 51.2
Unfunded Debt 44.6 48.0 44.7 39.6 37.7 36.0 31.4 31.2
Memo:
GDP (in billion of RS.) 4401.7 4822.8 5641 6500 7623 8673 10284 13095
* Jul-March Source: Budget Wing, Ministry of Finance

In 2009, the PIB market took off in the month of variables also had implications for high-quality,
August 2008. Despite the addition of some new risk-free sovereign credit. In contrast to these
features including a newly-issued 7-years paper issuances, the government retired the scheduled
with coupon rates revisited, a dull market response maturity of Rs. 16.2 billion in October 2008.
prevailed in the first auction of the fiscal year,
obvious by offers of as low as Rs 6 billion against The Government of Pakistan issued its first 3-Year
the target of Rs 20 billion. The short term nature of Ijara Sukuk Bond in the month of September 2008
the interest rate perceptions surrounding the market in order to diversify the investor base and tape
in addition to credit crunch confronting the enormous potential of Islamic finance. The
banking sector did not let banks opt for long-term purpose of issuance was to raise money from
government securities. Nonetheless, the second Islamic banking which has grown substantially in
auction held in February 2009 following the Pakistan in recent years. Moreover, issuance of
announcement of two percent discount rate hike in Sukuk has emerged out as an acceptable addition to
November 2008 revived the PIBs. As per limited investment avenues for Islamic banks to
expectation, overwhelming participation was meet their SLR eligibility. So far, three auctions,
witnessed in view of the likely cut in the interest one in each quarter, have been conducted by the
rates. A somewhat equal amount of Rs 20.0 billion SBP. Collectively, Rs 27.8 billion was mopped up
out of the total offers of Rs 56 billion was mopped against the total target of Rs. 30 billion. On
up against the target of Rs 20 billion. The easing aggregate, Rs 38.3 billion was offered which is
private sector demand pressures accompanied by evident of profound interest exhibited by the
the associated progress in macroeconomic market.

152
 External Debt and Liabilities

9.7.1.ii Floating Debt outflows, increase in reserve requirements, and

slower growth in their deposit base. Put it another
Floating debt consists of short term domestic
way, it was the slump in external financing and
borrowing instruments such as Treasury Bills and
inability of the government to mop up ample
central bank borrowing through the purchase of
money from non-SBP sources, that explicate the
Market Related Treasury Bills (MRTBs). The high
higher dependence on borrowings from the central
fiscal deficit incurred by the government in 2007-
bank.
08 led to an unprecedented increase in the stock of
floating debt, with borrowing from the SBP being
However in the second quarter of 2008-09, the
the instrument of choice to finance the significant
policy discount rate was sharply moved up by 200
gap between government expenditure and
bps on November 12, 2008 as part of the prior
revenues. The fiscal year 2007-08 saw floating
action under IMF macroeconomic stabilization
debt to increase to Rs 1589 6 billion; more than
program. This measure boosted interest in
double the amount outstanding five years ago. At
government papers in the latter part of the year.
the end of March 2009, floating debt increased to
Enhanced liquidity and declining credit demand
Rs 1923.5 billion, registering an enlargement of Rs
are reasons for better input to these auctions.
286 billion or 17.4 percent in nine months. The
Banks’ inclination to government papers over
slowdown in the rate of increase of floating debt
private sector lending truly echoes their shift
can be credited to the policy of zero quarterly
towards quality, given the thorny problem of
borrowing from the SBP followed by the
mounting non-performing loans. In order to lock-in
government on top of successful Treasury Bills
higher rates on the back of expectations of a peak-
auctions in the third quarter of 2008-09. The
out in the interest rate cycle, banks switched to a
reduction in this type of borrowing is advantageous
long view and offered huge bids in longer-tenor
as it not only halts the massive increase in the
MTBs. This profound interest, consecutively,
stock of domestic debt, but also reduces
allowed the government to restrain its borrowings
inflationary pressures on the economy.
from the central bank through MRTBs.
The outstanding stock of MRTBs grew from Rs
9.7.1.iii Unfunded Debt
1052.6 billion at the end of 2007-08 to Rs 1227.3
billion by end-March 2009 — an increase of Rs The wide array of instruments that fall under the
175 billion or 14 percent in nine months. By National Savings Scheme is referred to as
comparing this growth rate to an increase of 133 unfunded debt. The stock of unfunded debt stood
percent last year, the impact of the zero quarterly at Rs 1174.7 billion on end-March 2009, having
borrowing strategy is clearly visible. The T-bills increased by Rs 163.8 billion or 16.2 percent in
increased by Rs 159.2 billion or 30 percent during nine months. This huge magnitude of accrual
the first nine months of the current fiscal year and depicted a rise in retail investors’ interest in the
the stock as of March 31, 2009 rested at Rs 695.6 non-marketable funding source to reap optimal
billion as against Rs 536.4 billion at end-June return in uncertain environment. A quarterly
2008. This positive position is a complete reversal review of the profit rates on various schemes
of the negative growth of 18 percent in the T-bills augmented to this trend.
stock witnessed previous year.
The largest investment was in Special Saving
Persistent monetary tightening to curtail Certificates and Accounts which increased by Rs
skyrocketing inflation resulted in a shift to short- 82 billion or 36 percent to reach a total amount
term views of the market, more so post-May 2008. outstanding of Rs 310 billion by end-March 2009.
Banks, in anticipation of further raise in interest Significant investments were made in Bahbood
rates, displayed complete concentration of bids in
Savings Certificates as well, with the outstanding
3-months T-bills. Another factor supplementing
stock increasing by Rs 57.6 billion or 25 percent to
subdued auction results was the liquidity
constraints faced by banks due to foreign exchange reach a total of Rs 286.6 billion. Significant
increases were also seen in Pensioners Benefit
153
Economicc Survey 2008
8-09

Accounts and Regular Income Scheeme whereas the t percenttage of major macro-ecoonomic indiccators
stock of Defence
D Savin
ngs Certificattes and Savinngs analogoous to a cut inn the externall debt. Since 2006-
2
Accounts both witnessed reductionss. 07, dommestic debt witnessed
w a shharp rise alongg with
the relaated interest payments.
p Hiigher fiscal deeficits
9.7.2 D
Domestic Deb
bt Burden and ennormous sliippages in the revenuee and
During 19999-2000 to 2005-06, fisscal control anda expendditure targetts remainedd key probblems.
soaring growth
g rates surfaced ouut to be prim me Suppleementing to thhe intensity of o the situationn was
reasons beehind shrinkaage in interesst payments as
a a a policcy overhang and the moonetization of o the
deficit through centrral bank borroowings.
Table-9.100: Domestic Debt
D & Domesttic Interest Paayments Burden
Domestiic Interest Payyment (in perccent of)
Domesttic
Intereest Totall
Outstand
ding Taxx Totall Currrent
Year Paymeents Expen n- GDDP
Debt Revennue Revenu ue Expend diture
dituree
(In billions of Rs.) (Perccent)
1990-91 448.2 35.77 27.55 20.8 13.7 18.2 3.5
1994-95 807.7 77.99 30.22 24.1 18.2 22.5 4
4.2
1999-20000 1642.4
4 210.2 51.88 41.0 29.6 33.5 5
5.5
2001-02 1774.7
7 189.5 39.66 30.4 22.9 27.1 4
4.3
2002-03 1894.5
5 166.9 30.00 23.2 18.6 21.1 3.4
2003-04 2012.2
2 161.5 26.44 20.3 16.9 20.8 2
2.9
2004-05 2158.4
4 176.3 26.77 19.6 15.8 20.4 2
2.7
2005-06 2336.8
8 191.44† 25.22 18.8 14.4 19.6 2
2.7
2006-07 2610.2
2 287.5 32.33 22.1 16.0 20.9 3.3
2007-08 3217.2
2 443.1 42.22 29.6 19.5 23.9 4
4.3
2008-09* 3758.6
6 551.0 41.88 30.5 23.0 29.4 4
4.2
* End March Source: Buddget Wing (MooF) and EA Wiing

Interest payments as a percentage of revenue (ttax Interest payments on o domestic debt

d accounteed for
as well as a total reveenue) gauge the absorbiing 16.0 peercent of totaal expenditurre in 2006-077, and
capacity of governm ment revenues in terms of 19.5 percent in 20007-08. Intereest paymentss as a
interest paayments on domestic
d debtt. The growthh in percenttage of GDP observed a parallel
p turnarround
revenues outperformed d that of interrest obligations, of trends. The aforee-mentioned ratio
r in perceentage
resulting in a diminutiion of interesst payment as a terms decreased
d froom 5.5 percennt in 1999-20000 to
percent off tax revenuee from 51.8 percent
p in 19999- 2.7 perrcent in 20055-06, then inccreased in 2006-07
2000, to 25.2
2 percent in
n 2005-06. Inn the same speell, to 3.3 percent
p and inncreased to 4..3 percent in 2007-
2
interest paayments as a percentage ofo total revenuues 08 [Seee Table 9.10].
attenuatedd from 41 peercent to 18.88 percent. Ass a
percentagge of total exppenditure, intterest payments For thee first nine months
m of the current fiscal year
decreasedd from 29.6 percent in 19999-2000, to 144.4 2008-009, interest paayments stoodd at Rs 551 billion
b
percent inn 2005-06. However,
H intterest payments which sums to 41.8 percent off tax revenues and
have grow wn rapidly in the previious two fiscal 30.5 peercent of totaal revenues esstimated for 2008-
years, ammounting to 32.3
3 percent of tax revennue 09. As a percentagee of total exppenditure buddgeted
and 22.1 percent of total revenuue in 2006-007. for 20008-09, interesst payments are currentlyy 23.0
Interest payments grew w by 19 perccent in 2007-008, percentt. The intereest payments on domesticc debt
reaching Rs.
R 443.1 billion which wasw 42.6 perceent stood at 4.2 perceent of the prrojected GDP for
of tax revvenue and 29.6 percent off total revenuues. 2008-009.

154
155
TABLE 9.1
PUBLIC AND PUBLICLY GUARANTEED MEDIUM AND LONG TERM EXTERNAL DEBT DISBURSED AND
OUTSTANDING As on 31-03-2009
(US $ million)
S.No. Country/Creditor Debt Outstanding
as on 31-03-2009
I. Bilateral
a. Paris Club Countries
1 Austria 70.620
2 Belgium 34.900
3 Canada 450.290
4 Finland 5.940
5 France 2,180.600
6 Germany 1,808.520
7 Italy 104.620
8 Japan 6,377.240
9 Korea 484.370
10 Netherlands 116.560
11 Norway 23.220
12 Russia 123.180
13 Spain 80.120
14 Sweden 155.450
15 Switzerland 100.030
16 United Kingdom 9.110
17 USA 1,530.370
Sub-Total I.a. Paris Club Countries 13,655.140
b. Non-Paris Club Countries
19 China (including Defense) 1,456.500
20 Kuwait 97.500
21 Libya 5.000
22 Saudi Arabia 262.000
23 United Arab Emirates 121.000
Sub-Total I.b. Non-Paris Club Countries 1,942.000
Total I. (a+b) 15,597.140
II. Multilateral & Others
24 ADB 10,261.000
25 EIB 67.000
26 IBRD 1,888.000
27 IDA 9,244.000
28 IDB 160.000
29 IFAD 165.000
30 NORDIC Development Fund 16.000
31 NORDIC Investment Bank 9.200
32 OPEC Fund 25.100
Total II: Multilateral & Others 21,835.300
III. Bonds
33 Eurobonds 2,150.000
Total III: Bonds 2,150.000
IV. Commercial Banks 166.500
Grand Total (I+II+III+IV) 39,748.940
Source:Economic Affairs Division
TABLE 9.2

COMMITMENTS AND DISBURSEMENTS OF LOANS AND GRANTS (BY TYPE)

(US $ million)
Project Aid Non-Project Aid Total Total
Non-Food Food BOP Relief Relief
Plan/ Commit- Disburse- Commit- Disburse- Commit- Disburse- Commit- Disburse- Commit- Disburse- Commit- Disburse-
Fiscal Year ments ments ments ments ments ments ments ments ments ments ments ments
VI. 5th Plan
1978-79 1,064 599 190 213 55 50 86 86 - - 1,395 948
1979-80 1,002 808 121 161 55 21 419 419 61 61 1,658 1,470
1980-81 591 676 182 103 73 66 16 16 111 111 973 972
1981-82 887 536 320 174 110 89 10 10 293 293 1,620 1,102
1982-83 1,115 744 174 299 120 80 - - 178 178 1,587 1,301
Sub-Total 4,659 3,363 987 950 413 306 531 531 643 643 7,233 5,793
VII. 6th Plan
1983-84 1,580 695 166 149 88 177 - - 155 155 1,989 1,176
1984-85 1,804 903 161 125 196 79 - - 150 150 2,311 1,257
1985-86 1,810 1,055 186 93 163 245 - - 135 135 2,294 1,528
1986-87 2,035 1,006 331 205 130 57 - - 130 130 2,626 1,398
1987-88 1,903 1,223 390 219 230 218 - - 164 164 2,687 1,824
Sub-Total 9,132 4,882 1,234 791 807 776 - - 734 734 11,907 7,183
VIII. 7th Plan
1988-89 1,979 1,262 663 537 392 542 146 @ 146 @ 132 132 3,312 2,619
1989-90 2,623 1,312 201 386 258 287 217 @ 217 @ 140 140 3,439 2,342
1990-91 1,935 1,408 346 451 134 136 50 50 111 111 2,576 2,156
1991-92 2,219 1,766 43 316 322 284 - - 105 105 2,689 2,471
1992-93 1,204 1,895 182 232 454 309 - - 57 57 1,897 2,493
Sub-Total 9,960 7,643 1,435 1,922 1,560 1,558 413 413 545 545 13,913 12,081
IX. 8th Plan
1993-94 1,822 1,961 - 15 329 251 411 303 19 19 2,581 2,549
1994-95 2,714 2,079 3 23 279 258 - 211 29 29 3,025 2,600
1995-96 2,219 2,151 57 21 395 383 - - 10 10 2,681 2,565
1996-97 1,351 1,821 1 1 405 409 - - 2 2 1,759 2,233
1997-98 776 1,552 1 1 578 622 750 625 1 1 2,106 2,801
Sub-Total 8,882 9,564 62 61 1,986 1,923 1,161 1,139 61 61 12,152 12,748

1998-99 1,382 1,620 - - 185 270 650 550 2 2 2,219 2,442

1999-00 456 2,045 284 130 564 64 0 0 0.2 2 1,305 2,241
2000-01 433 1,042 469 340 0 13 658 687 2 3 1,562 2,083
2001-02 1,013 825 332 333 40 31 2,259 1,546 0 21 3,644 2,755
2002-03 811 845 47 192 22 9 1,085 867 8 8 1,973 1,921
2003-04 1,176 575 350 8 12 0 913 743 0 3 2,451 1,330
2004-05 2,379 880 115 296 0 0 1,087 1,531 0 2 3,581 2,709
2005-06 1,213 878 25 169 22 10 1,186 1,069 1,949 1,040 4,395 3,167
2006-07 923 865 225 25 0 12 2,152 2,007 550 388 3,850 3,297
2007-08 1,710 697 353 500 0 0 957 1,512 550 871 3,570 3,580
2008-09
July-Mar 1,770 623 100 308 18 0 1,913 2,306 95 59 3,896 3,297
Source: Economic Affairs Division
- nil
@ IMF Loan.
TABLE 9.3
ANNUAL COMMITMENTS, DISBURSEMENTS, SERVICE PAYMENTS AND EXTERNAL DEBT OUTSTANDING
(Medium and Long Term)
(US $ million)
Debt outstanding Transactions during period Debt Servicing as % of
(end of period) Foreign
Fiscal Dis- Undis- Commit- Disburse- Service Payments** Export Exchange
Year bursed bursed* ments ments** Principal Interest Total Receipts Earnings GDP
1960-61 171 .. 479 342 11 6 17 15 .. 0.4
1961-62 225 .. 429 304 20 11 31 27 .. 0.7
1962-63 408 .. 645 501 34 13 47 22 .. 1.0
1963-64 661 .. 526 541 44 18 62 27 .. 1.2
1964-65 1021 .. 832 706 37 25 62 26 .. 1.1
1965-66 1325 .. 537 533 41 33 74 29 .. 1.1
1966-67 1696 .. 628 623 52 44 96 35 .. 1.3
1967-68 2099 .. 561 729 62 46 108 31 .. 1.3
1968-69 2532 .. 656 594 93 65 158 44 .. 1.8
1969-70 2959 .. 555 564 105 71 176 52 .. 1.8
1970-71 3425 .. 873 612 101 81 182 43 .. 1.7
1971-72 3766 .. 143 409 71 51 122 21 .. 1.3
1972-73 4022 .. 543 355 107 86 193 24 18 3.0
1973-74 4427 .. 1268 498 118 79 197 19 14 2.2
1974-75 4796 1854 1115 976 144 104 248 24 16 2.2
1975-76 5755 1811 951 1051 141 108 249 22 14 1.9
1976-77 6341 1914 1111 960 175 136 311 27 15 2.1
1977-78 7189 2041 963 856 165 162 327 25 11 1.8
1978-79 7792 2514 1395 948 234 203 437 26 12 2.2
1979-80 8658 2586 1658 1470 350 234 584 25 12 2.5
1980-81 8765 2579 973 972 360 243 603 20 11 2.1
1981-82 8799 2921 1620 1102 288 203 491 20 9 1.6
1982-83 9312 3087 1587 1301 390 244 634 24 10 2.2
1983-84 9469 3436 1989 1176 453 274 727 26 11 2.3
1984-85 9732 4321 2311 1257 513 275 788 32 13 2.5
1985-86 11108 5242 2294 1528 603 303 906 30 14 2.8
1986-87 12023 6113 2626 1399 723 378 1101 30 16 3.3
1987-88 12913 7070 2687 1824 691 426 1117 25 15 2.9
1988-89 14190 7372 3312 @ 2619 @ 685 440 1125 24 14 2.8
1989-90 14730 8279 3439 @ 2342 @ 741 491 1232 25 14 3.1
1990-91 15471 9232 2576 2156 782 534 1316 22 14 2.9
1991-92 17361 9461 2689 2471 921 592 1513 22 13 3.1
1992-93 19044 9178 1897 2493 999 649 1648 24 15 3.2
1993-94 20322 9014 2581 2549 1105 673 1778 26 16 3.4
1994-95 22117 9806 3025 2600 1323 752 2075 25 17 3.4
1995-96 22292 7761 2681 2565 1346 791 2137 25 17 3.4
1996-97 22509 8583 1759 2233 1510 741 2251 27 18 3.6
1997-98 22844 6164 2106 2801 1600 723 2323 27 18 3.8
1998-99 25423 5076 2219 2442 955 399 1354 20 14 2.6
1999-00 25359 3421 724 1189 893 508 1401 18 12 2.1
2000-01 25608 2860 903 1538 974 583 1557 21 14 2.8
2001-02 27215 3504 2372 1420 745 462 1207 13 8 1.7
2002-03 28301 3811 1469 1328 793 546 1339 12 7 1.6
2003-04 28900 5392 1726 1035 2336 659 2995 24 14 3.1
2004-05 30813 4975 2545 1946 871 600 1471 10 6 1.3
2005-06 32407 5838 3077 2080 982 599 1581 10 5 1.2
2006-07 35182 6277 3034 2644 968 644 1612 9 5 1.1
2007-08 39530 6540 2725 3080 1062 704 1766 9 5 1.1
2008-09 P 39749 7451 3385 2926 815 505 1320 7 4 0.8
.. Not available, * Excluding grants, @ Inclusive of IMF(SAF) Loan Source: Economic Affairs Division
** Excluding short term credits, commercial credits, bonds and the IMF.
TABLE 9.4

DEBT SERVICE PAYMENTS OF FOREIGN MEDIUM AND LONG TERM LOANS (Paid in foreign exchange)
(US $ million)
Fiscal Year Kind 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
I. PARIS CLUB COUNTRIES
Principal 147.880 147.891 105.534 0.000 0.000 0.000 0.000 0.000 0.000 0.000 -
1 Australia
Interest 5.431 6.692 4.680 0.000 0.000 0.000 0.000 0.000 0.000 0.000 -
Principal 0.000 0.000 0.030 0.000 0.000 0.695 0.376 1.223 1.145 2.680 1.698
2 Austria
Interest 0.000 0.656 0.703 0.353 2.072 3.207 4.212 3.637 3.634 4.483 2.153
Principal 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 4.623 10.326 0.281
3 Belgium
Interest 0.000 1.267 1.654 0.864 3.102 1.413 1.767 1.859 2.003 2.266 0.952
Principal 15.947 15.318 8.097 0.000 0.000 0.000 0.302 0.841 1.289 1.662 0.833
4 Canada
Interest 2.360 1.302 1.073 0.740 1.317 1.438 2.766 4.436 5.584 5.359 4.257
Principal 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
5 Denmark
Interest 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Principal 7.018 0.000 0.203 0.034 0.000 28.766 10.636 24.921 31.366 35.983 14.355
6 France
Interest 4.477 8.767 15.315 16.508 47.516 61.557 82.615 81.489 87.430 99.483 42.720
Principal 0.000 0.000 0.000 0.000 0.000 0.000 0.024 0.055 0.084 0.108 0.041
7 Finland
Interest 0.000 0.131 0.307 0.157 0.111 0.088 0.164 0.286 0.364 0.360 0.104
Principal 38.726 9.551 5.741 0.854 3.834 7.925 2.64 12.749 15.294 16.202 6.846
8 Germany
Interest 11.406 6.532 7.493 7.403 18.903 17.575 20.981 29.826 32.225 36.354 15.070
Principal 0.512 3.121 2.262 1.115 2.136 0.316 0.541 0.642 21.415 24.039 0.205
9 Italy
Interest 0.270 0.620 1.778 0.982 2.718 2.753 3.605 2.331 1.168 1.294 0.465
Principal 14.796 0.538 38.689 46.279 70.319 396.646 48.114 65.577 49.280 46.528 42.547
10 Japan
Interest 11.725 59.970 73.006 28.445 36.224 129.721 149.982 86.805 91.573 103.564 137.479
Principal 0.000 0.000 0.123 0.000 0.000 44.834 45.272 96.485 55.725 56.254 29.886
11 Korea
Interest 0.000 5.063 13.040 5.232 0.000 24.884 23.787 38.168 40.759 22.623 9.770
Principal 0.401 1.874 2.938 0.000 2.125 2.124 3.877 4.064 12.124 12.124 1.251
12 Norway
Interest 0.287 1.314 2.577 0.543 1.797 1.537 1.321 2.196 0.598 0.460 0.580
Principal 0.000 0.936 1.016 0.710 1.102 0.000 0.221 0.528 0.679 0.654 0.275
13 Netherlands
Interest 0.043 0.630 0.952 0.637 1.337 2.419 1.894 3.050 3.223 3.656 3.130
Principal 0.000 0.000 0.000 0.000 0.000 0.000 0.937 18.958 2.751 2.859 1.364
14 Russia
Interest 0.000 0.000 3.098 3.457 0.000 0.000 3.367 23.375 6.566 6.436 3.165
Principal 0.591 0.000 1.737 0.000 0.000 0.000 0.412 0.957 1.862 2.768 1.434
15 Sweden
Interest 1.689 2.207 3.407 4.693 1.987 1.962 3.553 7.063 9.262 9.042 2.711
Principal 0.000 0.000 0.000 0.000 0.000 0.098 0.580 1.369 1.051 0.857 0.392
16 Spain
Interest 0.041 0.659 1.185 0.860 1.681 1.753 2.372 2.911 3.222 3.149 1.249
Principal 4.790 0.000 0.000 0.000 0.000 0.000 0.253 0.555 0.943 1.467 0.725
17 Switzerland
Interest 1.081 0.000 1.541 0.867 0.941 0.803 1.319 1.530 2.244 3.363 1.631
Principal 275.138 125.515 43.244 7.839 11.402 1.721 10.492 19.645 28.396 20.261 9.500
18 USA
Interest 24.907 17.825 59.906 33.115 61.619 56.098 64.334 61.191 63.618 62.136 27.542
Principal 0.000 2.644 6.470 3.845 5.643 36.203 0.959 1.916 1.076 0.110 0.072
19 UK
Interest 0.000 1.129 8.954 2.153 2.552 6.537 0.545 0.598 0.655 0.382 0.256
Principal 505.799 307.388 216.084 60.676 96.561 519.328 125.636 250.485 229.103 234.882 111.705
TOTAL (I)
Interest 63.717 114.764 200.669 107.009 183.877 313.745 368.584 350.751 354.128 364.410 253.234
Contd..
TABLE 9.4

DEBT SERVICE PAYMENTS OF FOREIGN MEDIUM AND LONG TERM LOANS (Paid in foreign exchange)
(US $ million)
Fiscal Year Kind 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
II. NON-PARIS CLUB COUNTRIES
Principal 0.958 11.932 163.019 90.810 35.228 14.798 13.868 18.967 14.148 14.148 13.074
1 China
Interest 0.000 8.136 29.702 20.699 25.661 13.980 13.310 7.377 11.623 10.060 8.473
Czecho - Principal 0.000 0.000 3.767 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
2
slovakia Interest 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Principal 0.262 0.000 1.478 1.226 3.030 5.395 5.733 7.054 7.079 7.408 5.355
3 Kuwait
Interest 0.058 0.000 0.000 0.000 0.900 2.195 2.032 2.203 2.369 2.438 1.800
Principal 1.156 0.000 0.000 0.000 0.000 0.000 0.000 0.000 14.229 1.823 0.100
4 Libya
Interest 0.185 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.789 0.060 0.029
Principal 1.230 0.000 0.000 0.000 13.079 5.424 5.373 3.383 0.000 0.000 0.833
5 Saudi Arabia
Interest 0.037 0.000 0.466 0.057 2.900 1.285 1.122 1.162 1.168 1.171 0.584
Principal 3.606 0.000 0.000 0.000 1.000 1.000 0.000 0.000 0.000 0.000 0.000
6 UAE
Interest 2.297 0.000 0.000 0.336 0.824 0.824 0.678 1.015 1.784 2.122 2.123
Principal 7.212 11.932 168.264 92.036 52.337 26.617 24.974 29.404 35.456 23.379 19.362
TOTAL (II)
Interest 2.577 8.136 30.168 21.092 30.285 18.284 17.142 11.757 18.733 15.851 13.009
III. MULTILATERAL
Principal 198.963 237.655 247.044 241.442 265.981 1370.429 245.272 236.757 261.303 330.746 290.259
1 ADB
Interest 142.195 156.565 151.188 151.668 172.738 179.919 75.061 74.020 89.089 119.058 97.158
Principal 169.766 222.773 227.914 233.789 249.499 287.173 322.704 294.377 273.293 296.781 243.627
2 IBRD
Interest 156.640 182.812 153.780 132.161 110.541 94.797 77.419 99.280 110.839 111.589 64.652
Principal 53.737 62.631 66.534 72.592 83.452 97.926 112.724 118.566 127.293 143.618 126.149
3 IDA
Interest 28.138 28.850 27.935 30.054 39.885 45.063 51.049 50.918 59.761 73.878 64.170
Principal 6.300 8.245 7.685 7.354 7.504 7.712 7.962 7.468 8.362 8.413 7.188
4 IFAD
Interest 2.457 2.376 2.206 1.996 1.751 2.106 2.043 1.802 1.827 1.951 1.433
Principal 4.090 23.213 23.246 23.083 9.679 3.208 2.956 3.504 4.066 6.942 4.544
5 IDB
Interest 0.363 5.040 3.955 2.061 1.046 0.731 0.612 0.795 1.690 3.726 4.126
Principal 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 25.000 791.501
7 IDB (ST)
Interest 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 22.866 28.026
Principal 432.856 554.517 572.423 578.260 616.115 1766.448 691.618 660.672 674.317 811.500 1463.268
TOTAL (III)
Interest 329.793 375.643 339.064 317.940 325.961 322.616 206.184 226.815 263.206 333.068 259.565
IV. DEVELOPMENT FUNDS
Principal 0.914 1.755 1.918 2.023 2.232 2.375 2.519 2.442 2.482 2.562 1.281
1 NORDIC
Interest 1.594 1.806 2.087 1.065 0.723 0.565 0.685 0.917 1.007 0.875 0.281
Principal 8.417 8.098 8.003 6.597 6.504 5.178 4.800 4.561 4.204 4.935 2.849
2 OPEC Fund
Interest 0.919 0.804 0.749 0.754 0.707 0.595 0.546 0.591 0.571 0.495 0.387
Turkey Principal 0.000 0.000 0.000 0.000 9.959 0.000 12.900 25.800 12.900 0.000 0.000
3
(EXIM Bank) Interest 0.000 4.797 5.981 2.514 0.388 0.000 1.875 2.776 0.648 0.000 0.000
Principal 0.000 0.000 0.000 0.000 0.000 0.637 0.679 1.345 2.094 2.600 1.583
4 E.I. Bank
Interest 0.000 0.118 0.254 0.234 0.939 1.722 2.592 3.324 4.262 3.847 1.626
Principal 9.331 9.853 9.921 8.620 18.695 8.190 20.898 34.148 21.680 10.097 5.713
TOTAL (IV)
Interest 2.513 7.525 9.071 4.567 2.757 2.882 5.698 7.608 6.488 5.217 2.294
V. GLOBAL BONDS
Principal 17.650 0.000 0.200 0.000 155.458 155.459 155.458 155.459 0.000 0.000 500.000
1 Euro Bonds
Interest 56.619 62.237 62.685 62.340 62.023 39.181 57.644 91.561 145.000 207.667 151.439
2 Saindak Principal 0.000 0.000 0.000 7.716 4.526 0.000 0.000 0.000 0.000 4.527 0.000
Bonds Interest 0.000 0.000 0.000 1.533 6.544 0.000 0.000 0.000 0.000 0.282 0.000
3 US Dollar Principal 0.000 0.000 0.000 21.903 21.903 21.903 21.903 21.903 0.000 21.903 21.963
Bonds Interest 0.000 0.000 0.000 16.573 7.118 4.594 3.326 4.414 0.000 5.684 3.680
Principal 17.650 0.000 0.200 29.619 181.887 177.362 177.361 177.362 0.000 26.430 521.963
TOTAL
Interest 56.619 62.237 62.685 80.446 75.685 43.775 60.970 95.975 145.000 213.633 155.119
(I+II+III+IV+V)
Total 74.269 62.237 62.885 110.065 257.572 221.137 238.331 273.337 145.000 240.063 677.082
Contd..
TABLE 9.4

DEBT SERVICE PAYMENTS OF FOREIGN MEDIUM AND LONG TERM LOANS (Paid in foreign exchange)
(US $ million)
Fiscal Year Kind 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
V. OTHERS
Principal 0.000 0.000 0.000 0.000 0.000 0.000 3.111 2.945 2.979 3.016 2.988
1 NBP's
Interest 0.000 0.000 0.000 0.000 0.870 0.866 0.981 1.118 1.077 0.804 0.335
Bank of Principal 0.000 3.810 5.130 3.195 9.585 6.245 0.000 0.000 0.000 0.000 0.000
2
Indosuez Interest 0.000 0.473 2.262 0.975 1.012 0.213 0.000 0.000 0.000 0.000 0.000
Principal 0.000 5.000 0.000 0.000 0.000 9.286 4.286 0.000 0.000 4.286 3.571
3 NBP Bahrain
Interest 0.000 1.240 0.000 8.500 1.410 0.621 0.983 0.469 0.000 0.474 0.111
Principal 0.000 0.000 2.500 2.500 0.000 0.000 0.000 4.286 4.286 0.000 0.021
4 ANZ Bank
Interest 0.000 0.000 1.392 1.535 0.000 0.000 0.000 0.552 0.856 6.657 4.048
Principal 16.280 16.280 17.280 16.280 66.280
5 Cash (ST)
Interest 7.416 10.370 11.370 9.105 5.766
Principal 0.000 8.810 7.630 5.695 9.585 15.531 23.677 23.511 24.545 23.582 72.860
TOTAL (V)
Interest 0.000 1.713 3.654 11.010 3.292 1.700 9.380 12.509 13.303 17.040 10.260
TOTAL Principal 955.198 892.500 974.322 745.287 793.293 2336.114 886.803 998.220 985.101 1103.440 2194.871
(I+II+III+IV+V) Interest 398.600 507.781 582.626 461.618 546.172 659.227 606.988 609.440 655.858 735.586 693.481
Grand Total (P+I) 1353.798 1400.281 1556.948 1206.905 1339.465 2995.341 1493.791 1607.660 1640.959 1839.026 2888.352
Source: Economic Affairs Division
TABLE 9.5

TERMS OF FOREIGN LOANS/CREDITS CONTRACTED BY PAKISTAN

2005-06 2006-07
Lending Country/Agency Amount Interest Rate/ Amortization Amount Interest Rate/ Amortization
(US $ Million) Commission(%) (years) (US $ Million) Commission(%) (years)
A. Paris Club Countries
1. Germany 5.8 0.75 40
2. Korea 17.3 2 30 - - 30
3. Japan 244.7 1.3 30 198.2 1.3 30
4.France 50.2 LiborEuro months-200bps 20
Sub-Total (A): 262.0 254.2
B. Non-Paris Club
1. China 322.3 1.5 5_20
2. Kuwait 38.1 2.5 ,24
3.Saudi Arabia 133.1 Libor6month+60bps 2
4.U.A.E
Sub-Total (B): 322.3 171.2
C Multilateral

1. Islamic Development Bank 146.0 1.25 & 5.1 15-25 425.0 LIBOR 6 months '+ 60 bps 2
2. IDA 1165.8 0.75 35 912.1 0.75 35
3. ADB 832.8 1 & 1.5 15-40 1386.1 1 & 1.5 15-32
4.OPEC - - - 10 1.25 20
5. IBRD 319.2 LIBOR+50bps 15-20 100.0 LIBOR6months+60bps 20
6. IFAD 53.6 0.8 35.0 - 0.75 35
Sub-Total (C): 2517.4 2833.2
Total (A+B+C) 3101.7 3258.6

2007-08 2008-09
Lending Country/Agency Amount Interest Rate/ Amortization Amount Interest Rate/ Amortization
(US $ Million) Commission(%) (years) (US $ Million) Commission(%) (years)
A. Paris Club Countries
1. Germany 460.4 0.2-1.3 30-40 262.1 0.75 40
2.Japan 12.1 0 39

Sub-Total (A) 472.5 262.1

B. Non-Paris Club

1. Saudi Arabia 40.0 2 26 125.0 3.25 3

2. China 327.7 3 15 - - -
3. Korea 20.0 1 30 205.0 0.1 30-40
Sub-Total (B) 387.7 330.0
C Multilateral
1. IDA 259.3 0.75+4.9 35 605.7 0.75 35
2. ADB 1436.0 1-1.5&Libor+60bps 15-24 1259.1 Libor+0.6 24

3. OPEC 5.3 2.5 20 15.0 Libor+1.85 20

4. Islamic Development Bank 127.1 3.8 15 243.2 Libor+0.55&3.825

5. IDB Stort-term 352.8 5.8 1 596.5 LIBOR+2.5&1 1

6. IBRD 173.6 0.75 30

7.IFAD 36.3 0.75 40

Sub-Total (C) 2,216.8 2,893.1

Total (A+B+C) 3077.0 3485.2
Source: Economic Affairs Division
TABLE 9.6

GRANT ASSISTANCE AGREEMENTS SIGNED

(US $ million)
2008-09
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Jul-Mar
I. Paris Club Countries
1. Australia 0.1
2. Austria 0.7
3. Canada 4.7 5.7 13.8 4.5 5.5
4. Germany 3.5 3.7 21.0 13.5 37.3
5. Japan 1.9 65.1 50.7 46.0 113.5 67.8 6.72 41.6
6. Netherlands 15.7 0.7
7. Norway 6.1 10.4 2.4
8. Korea 0.2
9. Switzerland 8.5 1.5
10. UK 90.5 16.5 45.7 145.7 67.1 45.3 189.1 136.87 142.5
11. USA 147.0 80.8 630.6 87.1 141.8 647.5 514.3 269.4 45.93 194.6
12. Italy 2.6 - - - - - - -
Sub-Total (I) 246.8 106.6 760.7 298.2 279.1 834.9 786.9 306.7 189.5 384.2
II Non Paris Club Countries
1. China 7.7 6.6 43.1 0.2 12.1 -
2. Iran - - - - - - - -
3. UAE - - - - - - - -
4. Oman 50.0
5. Saudi Arabia 100.0 50.0 200.0 300.0
Sub-Total (II) 7.7 56.6 43.1 100.0 50.2 12.1 200.0 - 300.0 -
III Multilateral
1. ADB 2.8 1.5
2. EEC / EU 9.0 70.4 22.1 1.2 58.1 25.2
3. Islamic Development Bank 0.4 0.3 0.3
4. IDA 75.2 1.1 0.5 12.4 1.5 1.7
5. IBRD 0.5 1.0 1.0 10.1 0.5
6. UN and Specialised Agencies - - - - - -
7. UNDP Special Grant 38.1 11.8 27.4 11.5 31.7 4.2 1.9
8. World Food Programme 26.6 68.7 11.4
9. UNFPA 3.2 5.9
Sub-Total (III) 117.0 26.8 132.3 44.4 45.3 74.4 13.8 59.8 - 25.2
IV Relief Assistance for
A. Afghan Refugees - 7.8 1.5 3.4 1.98 1.8
B. Earthquake
1. AFGHANISTAN - - - - - - 0.5 -
2. ALGERIA - - - - - - 1.0 -
3. AUSTRIA - - - - - - 0.7 -
4. AZERBAIJAN - - - - - - 1.5 -
5. BHUTAN - - - - - - 0.1 -
6. BRUNEI - - - - - - 0.6 -
7. CHINA - - 3.6 6.0 - 24.3 10.2
8 .CYPRUS - - - - - - 0.1 -
9. INDONESIA - - - - - - 1.0 -
10. JORDAN - - - - - - 1.0 -
11. MALAYSIA - - - - - - 1.0 -
12. MOROCCO - - - - - - 1.5 -
13. OMAN - - - - - - 5.0 -
14. PAK-TURK FOUNDATION - - - - - - 4.0 -
15. SAUDI ARABIA - - - - - - - 133.3
16. SOUTH KOREA - - - - - - 0.5 -
17. THAILAND - - - - - - 0.5 -
18. TURKEY - - - - - - 150.0 -
19. UK - - - - - - - 67.7
20. ADB - - - - - - 80.0 - 0.22
21. WB (IDA)
22. Germany 18.0
23. IDB - - - - - - 0.3 -
24. MAURITIUS 0.0
Sub-Total (IV) - - 3.6 13.8 - - 291.6 211.2 0.22 -
Grand Total (I+II+III+IV) 371.5 190.0 939.7 456.4 374.6 921.4 1,292.3 581.1 491.7 411.2
Source: Economic Affairs Division
TABLE 9.7

TOTAL LOANS AND CREDITS CONTRACTED (US $ million)

Lending Country/Agency 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
(Jul-Mar)

A. Paris Club Countries

1. Austria - 16.0 - - - -
2. Australia 63.7 - - - - - -
3. Belgium - - - - - - -
4. Canada - - - - - - -
5. France (Regular))
(Earthquake) - - - - - - 50.2
6. Germany 4.4 102.6 6.0 262.1
7. Japan (Regular) 32.6 26.0 245.0 198.0 460.4 596.5
- - - - - - -
8. Netherlands - - - - - - -
9. Norway - - - - - - -
10. Spain 1.9
11. Sweden 2.0 - - - - - -
12. UK - - - - - - -
13. USA 500.0 - 9.0 - - - -
14. Italy 12.1
Sub-Total (A) 565.7 0.0 63.8 26.0 0.0 102.6 245.0 254.2 472.5 858.6

B. Non-Paris Club Countries:

1. China (Regular) 18.1 44.4 280.0 118.2 683.1 322.0 328.0
(Earthquake) - - - - - - -
2. Korea (Earthquake) 17.0 20.0 205.0
3. Kuwait - - - - - 34.0 38.1
4. Saudi Arabia - - - - 25.0 - 133.1 40.0 125.0
5. Turkey (EXIM Bank) - - - - - - -
6. Abu Dhabi Fund - - 265.0 - - -
Sub-Total (B) 18.1 44.4 545.0 118.2 25.0 717.1 339.0 171.2 388.0 330.0

C. Multilateral:
1. IBRD (Regular) - - - - 53.0 349.3 319.0 100.0 173.6
(Earthquake) - - - - - -
2. IDA (Regular) 88.5 347.6 833.5 269.4 690.7 601.8 1166.0 772.1 259.1 605.7
(Earthquake) 139.9
3. ADB (Regular) 51.8 411.9 876.1 1040.9 885.3 765.4 832.9 1386.0 1436.4 1259.1
(Earthquake) - - - - - - -
4. IFAD (Regular) 17.4 14.2 22.3 54.0 36.3
(Earthquake) - - - - - - -
5. European Investment Bank 50.0
6. OPEC Fund 10.0 15.0 15.0 10.0 5.1 15.0
7. IDB (Regular) 284.3 502.6 356.3 47.3 350.0 123.4 146.0 200.0 127.1 243.2
(Earthquake) 225.1
8. KPC 38.0
9. IDB (ST) 352.5
Sub-Total (C) 424.6 1917.8 3185.9 1372.6 2051.3 1839.8 2517.9 2833.1 2216.5 2296.6
Grand-Total (A+B+C) 1008 1962 3795 1517 2076 2660 3102 3259 3077.0 3485.2
Source: Economic Affairs Division