WEDNESDAY, JANUARY 02, 2002
Pak aims to halve debt servicing in 3yrs
KARACHI: Pakistan, buried under $65 billion in foreign and domestic debt, said on Tuesday it planned to reduce the burden of debt servicing to 30-35 percent of foreign exchange earnings over the next three years from 70 percent now.
The State (central) Bank of Pakistan (SBP) Governor, Ishrat Husain said Islamabad was pursuing a strategy to reduce its huge debt servicing cost, which leaves meagre funds available for development projects.
"Our strategy is to reduce our debt servicing to a normal level of 30-35 percent over the three year period instead of current 70 percent," Husain told reporters at a news conference.
He said Pakistan would enhance its debt servicing capacity through an increase in foreign exchange earnings, which would strengthen its foreign exchange reserves.
Pakistan aims to boost export earnings to $10.1 billion in fiscal year 2001/2 from $9.2 billion the previous year, by targeting new markets such as Africa for its key textile exports, and by raising sales to the European Union after winning greater market access there.
Husain said Pakistan had spent $1.969 billion on debt servicing in the first six months of fiscal year 2001/02 (July/June).
"Another $2 billion in debt servicing will be paid in the next six months," he added.
Pakistan's foreign debt had increased by 24.5 percent to $36.1 billion in June 2001 against $29 billion a year earlier. The country's domestic debt stood at $28.9 billion as of June 2001.
Husain said the government was seeking new loans from the World Bank, International Monetary Fund and the Asian Development Bank on soft repayment terms.
"That will increase our stock of debt but their debt servicing will be very low," he added.
The IMF in early December approved a new $1.31 billion loan for Pakistan to help the country battle poverty and offset the impact on its economy from war in the region.
The loan paved the way for Islamabad to strike a deal with Paris Club of creditor nations last month to reschedule $12.5 billion of debt.
The deal rescheduled two-thirds of the debt over 38 years and the rest over 23 years, with 15-year and five-year grace periods respectively, and the deferral of interest dues gave Pakistan badly needed breathing space.
Husain said the Paris Club deal would save the country $3 billion in cash flow in the next three years.
Reserves build up
Husain said that the central bank would continue its policy of buying dollars from the official interbank and parallel kerb market to build up foreign exchange reserves.
He said the central bank had purchased $637 million from the kerb market during July-December 2001 as compared to $755 million same period last year.
"From the interbank market we have purchased $719 million (during July/Dec 2001) ... mainly done to absorb excess dollar supply," Husain added.
"It has also helped us to improve our reserves that now stand at $4.8 billion."
Excess dollar supply was prompted by higher remittances from overseas Pakistanis through official banking channels, due to international investigation of illegal money transfers.
Last month, the central bank said remittances jumped to $259.87 million in November 2001 compared with $73.39 million in November 2000, bringing the total to $709.46 million during the five months from July to November 2001. ( REUTERS )
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