As Pakistan and the United States inch towards improving relations, currently at the lowest ebb since 9/11, Islamabad has expressed hope that it will be able to get $3.5 billion in foreign assistance before the close of current financial year in June.
“So far, the government has received foreign loans of $1.5 billion for various projects but our latest assessment shows that we may get $3.5 billion in the wake of further support from international lending agencies and increase in project aid under the Kerry-Lugar Act,” said Dr Waqar Masood, Secretary of Economic Affairs Division here on Saturday.
The expected inflows were $300 million more than the annual target of $3.2 billion (excluding $500 million from floating exchangeable bonds), he added.
“Contrary to the expectations, the foreign assistance was better and the government has briefed us that this will improve further,” said Dr Hafiz Pasha, former finance minister and a member of the Economic Advisory Council.
For financial year 2011-12 ending June 30, the government had originally estimated that it would receive $3.7 billion in external support, including $500 million from exchangeable bonds backed by Oil and Gas Development Company (OGDC) shares. However, the exchangeable bonds are highly unlikely to be floated due to the ongoing European debt crisis.
Earlier, the slower-than-expected external inflows compelled the government to seek $576 million debt rollover from the Islamic Development Bank for two years.
Masood said so far the assistance under the five-year Kerry-Lugar programme of the US had not been very encouraging. He, however, hoped that a significant amount would arrive from April to June as part of the civilian aid package. Since the approval of the package, he said, the US had disbursed around $680 million.
Over the past many months, the US has slowed down project aid besides completely stopping reimbursements of the Coalition Support Fund after relations with Pakistan suffered serious blows one after another last year. To mend ties, both countries have agreed to redraft terms of engagement. However, a lot depends on a ‘favourable’ resolution from parliament, which is currently debating recommendations of the Parliamentary Committee on National Security.
Masood said the government was also expecting better inflows from China. So far, Beijing had disbursed $370 million and would release another $277 million before June, he added.
China has provided loans for the projects of Karakoram Highway, Chashma Barrage and Pakistan Satellite programme.
The World Bank has provided $279 million and another $281 million is in the pipeline. The Asian Development Bank has given $370 million and another $340 million is expected before June.
Most of the disbursements are project assistance as the international lenders have suspended budgetary support due to deterioration in macroeconomic indicators and government’s inability to undertake fiscal and energy reforms.
These project loans started picking up pace only after the government held portfolio review meetings with international lenders and their decision to link the release of money with progress on the projects.
To a question, Masood said assistance from the Friends of Democratic Pakistan (FODP) was not up to expectations because of fewer disbursements from Japan and the US.
FODP is a forum constituted in 2009 and comprises bilateral and multilateral donors aimed at helping Pakistan recover from losses suffered in the war on terror. The group committed to provide $4.7 billion in two years – a promise that has remained unfulfilled despite a lapse of three years.
Published in The Express Tribune, April 8th, 2012.