Pakistan to Repay $23B in Foreign Debt This Fiscal Year

Pakistan is scheduled to repay over $23 billion in external debt during the FY 2025–26, including $11 billion in bond and loan repayments and $12 billion in foreign deposits from allied countries. With looming maturities—such as a $500 million Eurobond in September—and an ambitious plan to issue a Panda bond, the government is racing to improve its fiscal calculus amid pressure from international creditors and the IMF. Failure to roll over some deposits may exacerbate the country’s debt‑to‑GDP burden, forecasted to rise due to slowing nominal growth and moderate inflation

• Total external debt to be repaid: > $23 billion

• $11 billion: Loan repayments to multilateral, bilateral creditors and bondholders

• $12 billion: Foreign deposits—Saudi Arabia ($5 B), UAE ($2 B), Qatar ($1 B), Kuwait ($0.7 B), plus $4 B China SAFE deposits

• Maturing Eurobond: $500 million in September 2025 (2015 issue at 8.25%), plus another $1 B maturing in April 2026 (6% coupon)

• Public sector repayments: $15 billion

• State Bank of Pakistan (SBP) obligations: $9 billion, including IMF loans and unhedged foreign deposits

External liquidity pressure

Large debt payments, along with slowing GDP growth, threaten foreign exchange reserves and macro stability.

Fitch noted Pakistan needs > $22 billion in external debt servicing and flagged funding risks despite recent stability.

Rollover of bilateral deposits

The repayment plan heavily relies on securing extensions or rollovers for $12 billion from friendly nations.

Should these funds not be renewed, Pakistan may face default pressures 

Debt sustainability concerns

The IMF and financial analysts warn that Pakistan's debt‑to‑GDP ratio, while temporarily masked by inflation, could worsen as growth slows.

Without structural reforms, future debt servicing demands may spiral 

Budgetary constraints

Large debt service drains have forced borrowing and crowd out essential development and social sector spending.

Pakistan recently granted $21 billion in tax exemptions, exceeding its annual need to repay commercial and bilateral debt ($17 B)—highlighting fiscal inefficiency

• Policy tools considered:

• Panda Bond issuance in China remains in the planning stages but faces global market uncertainty.

• New Eurobond or Sukuk issuance deferred due to high global interest rates 

• IMF program alignment:

• Pakistan is under a $7 billion Extended Fund Facility (EFF) that mandates fiscal discipline, deficit control, and structural reform.

• The upcoming IMF review will be critical to unlocking additional inflows and boosting confidence 

• Medium-Term Debt Strategy (MTDS):

• The Finance Ministry is refining its MTDS to improve maturity profiles and diversify funding sources.

• Launch of alternative instruments like Panda Bonds and potential Gulf bank loans are being considered

For Currency & Reserves

• Heavy repayments in foreign currency risk depleting SBP reserves unless offset by friendly rollovers or external financing.

• A shortfall may pressure the rupee and could force administrative import curbs.

For Debt Ratings

• Fitch highlighted refinancing uncertainties and the potential downgrade of Pakistan's "junk" rating without progress on the IMF and bilateral agreements

• Rating downgrades would increase future borrowing costs and lower investor confidence.

For Fiscal Outlook

• Rising debt service eats into fiscal space, limiting public spending and infrastructure development.

• The juxtaposition of generous tax exemptions and high debt servicing suggests a critical need for revenue reforms.

Pakistan’s task of repaying over $23 billion in foreign obligations this fiscal year underscores the fragility of its external position. Success hinges on rolling over major deposits, securing alternative finance, and sticking to IMF-aligned reforms. Failure would risk reserve depletion, downgrades, and tighter fiscal conditions. With mounting domestic development needs and external refinancing risks, Pakistan faces a critical juncture—balancing immediate liquidity needs with longer-term debt sustainability.