Pakistan’s upcoming budget for the fiscal year 2025-26 is projected to experience a substantial increase in external debt repayments as the country will be required to settle two major Eurobond obligations, totaling $1.5 billion, upon their maturity this year.
Confronted with these escalating debt servicing requirements, Islamabad is actively exploring various avenues to re-enter the international capital market.
The government is considering the issuance of multiple international bonds in the next fiscal year, including Eurobonds, Sukuk, and potentially Panda bonds.
However, the success of these planned bond issuances will largely depend on the prevailing market appetite and the prevailing mark-up rates in the United States and other key global financial centers.
Unfavorable market conditions or elevated interest rates could present considerable challenges to Pakistan’s borrowing plans.
Following the successful completion of the first review of its current loan programmes with the International Monetary Fund (IMF) and the subsequent disbursement of the second tranche of funds, Pakistan anticipates a further improvement in its credit rating from international rating agencies.
The government made attempts to issue a Panda bond in the outgoing fiscal year but was ultimately unsuccessful. With increased requirements for accessing the Chinese market, the Panda bond is now expected to be launched in the next fiscal year, with an initial issuance ranging from $200 to $250 million.
“There are two major repayments that will become due upon the maturity of Eurobonds. One will be due in September 2025, valued at $500 million, which was launched for a 10-year term, backed in 2015 at an interest rate of 8.25%,” top official sources confirmed to The News on Wednesday.
“The second repayment will become due upon the maturity of a Eurobond worth $1 billion, which was launched in April 2021 at an interest rate of 6% for a five-year term.”
The total figures for external debt and liabilities are still under calculation, although budget officials are actively working to finalize the data on total dollar inflows and outflows related to foreign loans and grants.
Throughout the current week, high-ranking officials from the Economic Affairs Division and the Ministry of Finance continued consultations to determine the total dollar inflows in the form of programme and project loans, as well as outflows for external debt servicing. However, it has become clear that external debt servicing is likely to increase significantly due to the two substantial repayments resulting from the maturity of the aforementioned Eurobonds.
An additional debt repayment for an international bond, launched in April 2021 and valued at $1 billion, is scheduled to mature in 2031. This international bond was issued at an interest rate of 7.3%.
The government had also launched another international bond in January 2022, aiming to generate $1 billion for a seven-year term, which is set to mature in 2029.
