Pakistan’s foreign loans surge by 45% in five months

By Khaleeq Kiani (18 December 2020) Pakistan`s foreign loan inflows have jumped by almost 45 per cent to about $4.5 billion in first five months (July-November) of the current fiscal year as compared to the corresponding period in the last fiscal.

With the loans taken in the five months, the country has received a total of about $23.6 billion in foreign loans during tenure of the Pakistan Tehreek-i-Insaf government (since July 1, 2018), according to data on Foreign EconomicAssistance compiled by the Ministry of Economic Affairs.

The ministry said on Thursday `the government has received $4.499 billion total external inflows from multiple financing sources` during July-November of fiscal year 2020-21. This amounted to 37% of the annual budget estimates of $12.233 billion for the entire FY2020-21, it added.

In the corresponding period of hscal year 2019-20, the external inflows stood at $3.108 billion, which was around 24% of the annual budgeted amount of $12.958 billion.Last week, the ministry reported that Pakistan had received a total of $10.7 billion during FY2019-20 and $8.4 billion during FY2018-19.

Since the outbreak of Covid-19 the disbursements for project financing from development partners had slowed down, the ministry said, adding that the pandemic had resulted in most economic activities, including work on development projects, coming to a halt.

However, after easing of pandemic-related restrictions by the government the economic activities are being revived, which may lead to an increase in project financing in the current fiscal year (2020-21).

Giving a breakdown of the $4.499 billion foreign loans, the ministry said about $1.3billion, or 29%, pertained to programme loans/budgetary support, mostly from multilateral lenders, to help restructure Pakistan`s economy. About $1.621 billion, or 36%, was foreign commercial borrowing to repay maturing foreign commercial loans, it said.

In addition, $518 million, or 12%, was received as project financing for development activities, presumably for improving the socio-economic development of the country and asset creation. Another $60 million, or 1%, was short-term credit while $1billion, or 22%, was received in terms of safe depositsduring the current fiscal year.

The bilateral and multilateral development partners disbursed $1.878 billion of foreign economic assistance during July-November of the ongoing fiscal year against the budgetary allocation of $5.811 billion for fiscal year 2020-21 on concessional terms with longer maturity.

Among the multilateral development partners, the Asian Development Bank provided $712 million and the World Bank disbursed $694 million against the budgetary allocation of $2.257 billion. From bilateral sources, France, the US and China provided $33.4 million, $63.8 million and $21.8 million, respectively.

During July-October of 2020 total servicing of external public debt was $2.45 billion against the annual repayment estimates of $10.363 billion for the entire fiscal year. Of this, $2.035 billion (83% of total external public debt servicing) was repaid as principal and $415 million (18%) as interest on the outstanding stock of external public debt.

During July-October of 2020-21, the government settled $1.295 billion worth of foreign commercial loans. Similarly, the government also repaid $695 million to multilateral and $102 million to bilateral development partners.Considering the foreign exchange constraints, unancing of development projects and repayments of these huge external public debts compelled the government to further borrow from multiple sources, the ministry said.

For the period July-October of 202021, net transfers to the government were $144 million, as external loan inflows stood at $2.179 billion against total outflows of $2.035 billion in the same period.

Positive net transfers came mainly due to higher inflows from multilateral lending agencies. Interestingly, the stock of external loans which wereobtained on market rates decreased by $618 million and the share of concessional external loans with longer maturity increased by $761 million.

As of June 30 this year, Pakistan`s total external public debt amounted to $77.9 billion, compared to$73.4 billion in the same period last year, showing a growth rate of 6%. The total external public debt came from three key sources -51% from multilateral debt, followed by 31% in bilateral debt, including China`s safe deposits, and remaining 18% from foreign commercial banks and institutions, including Eurobonds and Sukuk.

Source: daily Dawn ()