Government of Pakistan to Borrow Rs32 Trillion This Fiscal Year, Dependent on IMF and China Support
The government announced on Tuesday its plan to borrow Rs32 trillion this fiscal year, including rollovers from foreign banks and bilateral lenders, with the success of the borrowing plan heavily dependent on the timely approval of the IMF programme and continued financial support from China.
According to the Ministry of Finance’s annual borrowing plan for fiscal year 2024-25, Pakistan is once again heavily relying on rolling over maturing debts—a strategy that has exacerbated the nation’s debt burden. The plan reveals that Rs8.5 trillion will be needed to finance the budget deficit, while an additional Rs23.4 trillion will be required to repay maturing debt.
The government’s borrowing plan, prepared by the Debt Management Office, outlines a strategy to meet its Gross Financing Needs (GFN), which include both the fiscal deficit and debt maturities. The total debt requirement of Rs32 trillion for the federal government excludes Rs2.6 trillion needed by the State Bank of Pakistan (SBP) to meet its obligations. The central bank must also settle $3.7 billion in debt owed to the United Arab Emirates, $4.2 billion in Chinese trade finance, and $900 million in maturing IMF debt.
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The borrowing plan’s success is heavily dependent on the IMF programme’s timely approval and China’s willingness to roll over nearly $7.9 billion in debt, including $4 billion in cash deposits and $3.9 billion in foreign commercial loans. Finance Minister Muhammad Aurangzeb had claimed that the IMF would approve Pakistan’s $7 billion bailout package by the end of August, but the IMF’s schedule through August 30 does not yet include Pakistan.
The annual borrowing plan also highlights that Rs8.5 trillion is needed for budget deficit financing, with 92% of this amount expected to come from domestic sources. Only 8% of budget financing, or Rs666 billion, will be sourced from foreign loans, a significant drop from the historical 20% provided by foreign lenders.
Securing timely rollovers of foreign loans, particularly from China, is a key challenge. The government also plans to raise $1.2 billion in new commercial debt, but progress has been limited due to high costs. Additionally, the plan includes the issuance of Panda Bonds in Chinese capital markets and Green Bonds in international markets to raise around $1 billion.
The Debt Office has warned that the Rs32 trillion borrowing plan is subject to potential variations due to domestic and international macroeconomic conditions and debt market dynamics. The government also plans to carry out zero net issuance through treasury bills this fiscal year, refinancing maturing loans through long-term government securities like Pakistan Investment Bonds and Government Ijara Sukuk.
