Reliance on external loans reduced by one-third

ISLAMABAD: Indiscriminate external borrowing in the federal budget and development financing is no more a rule of thumb, as the government has apparently learnt a lesson and reduced its reliance on external resources by one-third for the next financial year.

The estimates of foreign assistance show that the government projects an amount of Rs386.6 billion from external resources to meet its financial obligations for the next fiscal year. This amount is Rs191.4 billion, or one-third, less than the revised numbers of Rs578 billion for the current fiscal year ending June 30. The year’s budget was prepared through heavy reliance on commitments made by the Friends of Democratic Pakistan at the Tokyo Forum. Official documents show that the government estimated Rs191.1 billion on account of Tokyo pledges but it could only manage half of it.

With then Finance Minister Shaukat Tarin’s failure to garner these pledges, the government had to borrow more from domestic market to meet the budgeted expenses which crowded out the private sector.

For the next financial year, the authorities have estimated Rs86.5 billion on account of Tokyo pledges out of the remaining committed amount of Rs400 billion.

Secretary Finance Salman Siddique said that, for the next financial year, the government only counted on those pledges which it was sure to get in a given timeframe.

He said the government has also only included 40 per cent of the Rs127 billion, equivalent to $1.5 billion, to be received under the Kerry-Lugar Act. The said amount has also been cleared by the US embassy, said Siddique.

The finance ministry also estimated over 50 per cent reduction in loans on account of non-food aid. As against this year’s Rs186.7 billion in assistance, the authorities estimate loans worth Rs82 billion for the next financial year. The major cut was placed on the loans from the Asian Development Bank. For the next fiscal year, the government has calculated Rs43.2 billion in ADB loans as against the Rs103 billion for this financial year.

Similarly, non-food loans from the World Bank would amount to Rs 37 billion – a 45 per cent reduction. The European Union non-food grant would also be slashed by over 50 per cent during the next fiscal year.

For development projects, the government has estimated Rs78.4 billion in foreign assistance for the next fiscal year, which is one-fourth less than the current year. Federal departments would receive 33.6 billion in development loans and the autonomous bodies’ external loans would stand at Rs13.3 billion – about 60 per cent would go to Wapda and the remaining to the National Highway Authority. The provincial governments would also receive Rs31.4 billion in external development loans for the next fiscal year.

Published in the Express Tribune, June 6^th, 2010.