External debt Financial News

Click here! At end-June 2023, long-term debt (with original maturity of above one year) was placed at USD 505.5 billion, recording an increase of USD 9.6 billion over its level at end-March 2023, the report said. The share of short-term debt (with original maturity of up to one year) in total external debt declined to 19.6% at end-June 2023 from 20.6% at end-March 2023.

India's external debt of USD 624.7 billion at March-end 2023 with a debt-service ratio of 5.3 per cent is within the comfort zone and modest from a cross-country perspective, Finance Minister Nirmala Sitharaman has said. In her foreword to 'India's External Debt: A Status Report 2022-23' released earlier this month, Sitharaman said the ratio of external debt to GDP declined to 18.9 per cent at March-end 2022-23 from 20 per cent a year ago. The long-term debt constituted 79.4 per cent of total external debt, while short-term debt, which is 20.6 per cent of the total external borrowing, is basically incurred to finance imports, enhancing the stability aspects of the total external debt, she said. «From a cross-country perspective, India's external debt position is better than most of the Low and Middle-Income Countries (LMICs) as measured by select vulnerability indicators, such as share of short-term debt in total external debt, external debt to GNI (Gross National Income), forex reserves to external debt and external debt to exports,» the minister noted. The report said the debt service ratio during 2022-23 has increased marginally to 5.3 per cent from 5.2 per cent during the previous year, mainly due to a rise in debt service payments from USD 41.6 billion in 2021-22 to USD 49.2 billion in 2022-23. The 'debt service ratio' is measured by the proportion of 'gross debt service payments' (both principal and interest) to 'external current receipts', which indicates the extent of pre-emption of forex reserves for the purposes of repayment of principal and interest out of the stock of foreign debt. The increase in gross external debt service payments during 2022-23 was due to the combined impact of an increase in debt service

India’s external debt declined to 18.9 per cent of GDP at the end of March 2023 from 20 per cent last year, revealed the Finance Ministry's annual status report that was published on Wednesday. However, the external debt of India rose marginally by 0.9 per cent as the external debt stood at $624.7 billion at the end of March 2023 as compared to $619.1 billon last year. The last status report by the ministry published in 2022 showed that India’s external debt grew by 8.2 per cent in March 2022 when compared to March 2021. Finance Ministry in its report has attributed the 'rise in loans from short-term trade creditors (5.6 per cent), and bilateral (6.3 per cent) and multilateral (2.7 per cent) loans' as major factors for the marginal increase in external debt during the period under review. «As of end-March 2023, all the macroeconomic indicators of external debt remained sustainable. Commercial borrowings remained the largest component of external debt,» said the ministry's report on external debt. Commercial borrowings, Non-Resident Indian (NRI) deposits, short-term trade credits and multilateral loans together accounted for 89.6 per cent of the total external debt of India. Commercial borrowings and NRI deposits declined by 1.7 per cent and 0.1 per cent, respectively. Long-term debt which forms the major chunk of India's external debt reduced by 0.2 per cent at the end of March 2023 while short-term debt, constituting 20.6 per cent of the total debt, rose by 5.5 per cent mainly due to 5.6 per cent increase in the short term trade credit. The valuation effect of US dollar and other major currencies also plays an important role on the external debt of the country.

Also Read: Pakistan govt approves massive hike in power tariff on IMF demand: Report Moreover, another $1 billion safe deposit from China is also due. This means that Pakistan and China are currently working on the rollover of around USD 3 billion bilateral debt within the ongoing month. Also Read: Pakistan’s forex reserves double to $8.73 billion, reach nine-month high Not just China, the Islamic nation has to pay back Saudi Arabia's debt as well.

Pakistan on policies to be supported by a Stand-By Arrangement (SBA) in providing USD 3 billion, the last minute rescue package for Islamabad’s acute balance of payment crisis. According to major global credit rating agencies Islamabad would be compelled to default on external borrowings without the IMF assistance. Surprisingly, Pak forex reserves are now below USD 3.5 billion, hardly sufficient for less than a month’s requirement for even essential imports.