Budget books fudge foreign loan figures
Against expected borrowings of $10b, estimates mention $6b only
Against expected borrowings of $10b, estimates mention $6b only. PHOTO: INP
ISLAMABAD:
While the government will borrow roughly $10 billion in foreign loans in the next financial year, the budget documents to be presented in National Assembly on Friday only mention $6 billion in borrowings, apparently to deflect criticism against the growing debt pile.
The finalised foreign borrowings plan for 2016-17 excludes all publicly guaranteed loans, borrowings obtained previously to inflate forex reserves and foreign short-term commercial loans, sources told The Express Tribune.
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These exclusions will understate the country’s external debt pile by as much as $4 billion in a single year.
By including these borrowings into the total foreign economic estimates of next fiscal, the accumulated loans would be close to $10 billion – the highest ever borrowings in a single financial year.
The sources said most of the loans from China have been excluded from Estimate of Foreign Assistance Book 2016-17 that the Finance Ministry will table in the lower house of parliament along with the other budget documents.
Against original estimates of $3.1 billion Chinese loans being obtained in the outgoing fiscal year, the government has now projected only $594 million borrowings from China in 2016-17. This shows a reduction of 513% or $2.5 billion over the previous year.
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The $594-million figure appears highly unrealistic, as Islamabad has started work on billions of dollars worth of defence and power projects with China’s cooperation.
The sources said another $1 billion in China Safe Deposit loan, which is part of Pakistan’s foreign currency reserves held by the central bank, has been excluded from the estimates.
To a question if Islamabad had decided to return this loan, State Bank spokesman Abid Qamar said the $1 billion loan was obtained by the federal government and it would be in a better position to explain this.
Another loan of over $1.2 billion to be obtained for building 2,200MW nuclear power plants in Karachi, known as K2 and K3, has been excluded not only from the next fiscal’s estimates but also from the outgoing year’s estimates.
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China signed an agreement to provide about $6.5 billion in loan for K2 and K3 plants, and Islamabad has already received about $1.5 billion under this head. The total foreign economic assistance for the Pakistan Atomic Energy Commission (PAEC), which manages these plants, is shown at just $126 million for the next fiscal.
For the outgoing year, PAEC’s original foreign loans were estimated at $1.4 billion.
The government also has decided to exclude short-term foreign commercial borrowings from next year’s loan estimates. In the outgoing fiscal, the government borrowed $1.4 billion from foreign commercial banks without competitive bidding.
In the words of Finance Secretary Dr Waqar Masood, these short-term loans were meant for “balance of support and budget financing”.
Growing public debt has severely limited Pakistan’s loan repayment ability, forcing the government to reschedule payments every year.
In 2016-17, borrowings from the Asian Development Bank are projected at $1.1 billion. The World Bank is expected to give fresh loans worth $1.5 billion while loans from the Islamic Development Bank may go down drastically to about $465 million.
A Finance Ministry official claimed the foreign loans have been excluded from the estimates as they were double counted.
Published in The Express Tribune, June 1st, 2016.
While the government will borrow roughly $10 billion in foreign loans in the next financial year, the budget documents to be presented in National Assembly on Friday only mention $6 billion in borrowings, apparently to deflect criticism against the growing debt pile.
The finalised foreign borrowings plan for 2016-17 excludes all publicly guaranteed loans, borrowings obtained previously to inflate forex reserves and foreign short-term commercial loans, sources told The Express Tribune.
Pakistan's development budget to undergo Rs402 billion cut
These exclusions will understate the country’s external debt pile by as much as $4 billion in a single year.
By including these borrowings into the total foreign economic estimates of next fiscal, the accumulated loans would be close to $10 billion – the highest ever borrowings in a single financial year.
The sources said most of the loans from China have been excluded from Estimate of Foreign Assistance Book 2016-17 that the Finance Ministry will table in the lower house of parliament along with the other budget documents.
Against original estimates of $3.1 billion Chinese loans being obtained in the outgoing fiscal year, the government has now projected only $594 million borrowings from China in 2016-17. This shows a reduction of 513% or $2.5 billion over the previous year.
Budget 2015-16: Finance Minister Ishaq Dar unveils Rs4.451 tr budget
The $594-million figure appears highly unrealistic, as Islamabad has started work on billions of dollars worth of defence and power projects with China’s cooperation.
The sources said another $1 billion in China Safe Deposit loan, which is part of Pakistan’s foreign currency reserves held by the central bank, has been excluded from the estimates.
To a question if Islamabad had decided to return this loan, State Bank spokesman Abid Qamar said the $1 billion loan was obtained by the federal government and it would be in a better position to explain this.
Another loan of over $1.2 billion to be obtained for building 2,200MW nuclear power plants in Karachi, known as K2 and K3, has been excluded not only from the next fiscal’s estimates but also from the outgoing year’s estimates.
Budget 2015-16: Govt eyes 5.5% GDP growth next year
China signed an agreement to provide about $6.5 billion in loan for K2 and K3 plants, and Islamabad has already received about $1.5 billion under this head. The total foreign economic assistance for the Pakistan Atomic Energy Commission (PAEC), which manages these plants, is shown at just $126 million for the next fiscal.
For the outgoing year, PAEC’s original foreign loans were estimated at $1.4 billion.
The government also has decided to exclude short-term foreign commercial borrowings from next year’s loan estimates. In the outgoing fiscal, the government borrowed $1.4 billion from foreign commercial banks without competitive bidding.
In the words of Finance Secretary Dr Waqar Masood, these short-term loans were meant for “balance of support and budget financing”.
Growing public debt has severely limited Pakistan’s loan repayment ability, forcing the government to reschedule payments every year.
In 2016-17, borrowings from the Asian Development Bank are projected at $1.1 billion. The World Bank is expected to give fresh loans worth $1.5 billion while loans from the Islamic Development Bank may go down drastically to about $465 million.
A Finance Ministry official claimed the foreign loans have been excluded from the estimates as they were double counted.
Published in The Express Tribune, June 1st, 2016.