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Last year forex crisis was manufactured by unusual $4.34bn payments of loans - Naveed Yaseen - 10-11-2009 05:40 AM
By Mushfiq Ahmad
KARACHI: Pakistan spent $4.345 billion on debt servicing last year, which explains why the country's foreign exchange reserves depleted as sharply as they did. The country paid $3.271 billion as principal amount and $1.074 billion as interest. This was sharply higher than the debt payments made in 2007-08 when the country paid $883 million, $577 million in principal and $306 million in interest.
Pakistan had to seek loans from the International Monetary Fund last year because of the fast depletion of foreign exchange reserves. The IMF approved a $7.6 billion loan for Pakistan in November 2008 and augmented it by 3.2 billion in August this year.
This huge debt servicing also took its toll on the Pakistan currency which lost about 32 percent value before recovering. The dollar had moved form Rs 61 to Rs 83 before the IMF loan gave the exchange rate some stability. Economists say the country is likely to face similar situation in the years to come because the burden of foreign exchange debt and liabilities has grown sharply. The country's total external liabilities rose to $52.833 billion by end-June 2009 from $40.326 billion at end-June 2007.
"Pakistan will have to arrange huge amounts of foreign exchange in future to arrange payments for the debt that the present and previous government has accumulated," says an economist. It is pertinent to mention here that expenditure on defence and debt servicing eats up most of our resources, leaving very little amount for development.
http://www.dailytimes.com.pk/default.asp?page=2009\10\11\story_11-10-2009_pg5_8