ISLAMABAD: Pakistan has met a key International Monetary Fund (IMF) condition by increasing its debt maturity profile while also pursuing a $1 billion foreign commercial loan in April, according to a news report.
The development comes as the country sees an improvement in debt indicators, including a notable slowdown in debt accumulation to single digits after years of sharp increases.
The Finance Division reported that the average maturity period of domestic debt had been extended to three years and three months by December 2024, exceeding the IMF’s requirement of two years and eight months.
The shift, achieved by reducing reliance on short-term Treasury bills (T-bills) and increasing investment in long-term Pakistan Investment Bonds (PIBs), has lowered both refinancing and interest rate risks while reducing the government’s dependence on commercial banks.
Director of the Debt Office, Eraj Hashmi, noted that the shift towards longer-term bonds had strengthened investor confidence, attracting those seeking stable, long-term returns.
Pakistan is also set to begin formal talks with the IMF on March 3, with discussions expected to continue until March 14. A successful review would unlock the second tranche of the IMF loan, worth $1.1 billion.
Meanwhile, the government is also securing a $1 billion foreign commercial loan, backed by a $500 million credit guarantee from the Asian Development Bank (ADB). Standard Chartered, Deutsche Bank, and a Chinese bank have expressed interest in the deal, sources said.
The government is also exploring debt-raising options through China’s Panda Bonds but expects the process to take time. Initial estimates suggest Panda Bonds could carry an interest rate of around 3.5%, significantly lower than the 8.5% Pakistan would pay for issuing Eurobonds.
The Finance Division projects a slowdown in debt accumulation, estimating that total public debt will rise to Rs77.5 trillion by June 2025, with a net increase of Rs6.3 trillion—lower than last year’s Rs8.4 trillion rise. In the first half of the fiscal year, Rs2.8 trillion was added to the debt stock at a moderate pace of 3.9%.
To further reduce debt burden, the finance ministry plans to continue its debt buyback policy, having already repurchased Rs1 trillion in T-bills, which saved Rs31 billion in interest costs. In the second half of the fiscal year, the government will focus on buying back PIBs instead of short-term securities.
