Pakistan receives $1b from ADB, World Bank

Inflow supports rupee that appreciates to 167.36 against dollar

KARACHI: Pakistan on Wednesday received $1 billion in fresh loans from two international financial institutions for overcoming the shortfall in budgeted expenditures, mainly on health and socio-economic fronts, and to better fight the coronavirus pandemic.

“State Bank of Pakistan (SBP) has received $1 billion today (Wednesday) - $500 million each from the Asian Development Bank (ADB) and the World Bank,” the central bank announced through its Twitter handle. The receipt will improve the SBP’s foreign currency reserves to over $11 billion or equivalent to almost four months of import cover compared to 3.6 months of import cover earlier.

The receipt of loans supported the rupee that appreciated Rs0.29 and closed at Rs167.36 against the US dollar in the inter-bank market. Earlier in the day, the rupee briefly fell to an all-time intra-day low below Rs168, it was learnt.

Pakistan is expected to receive another $500 million in loan from the Asian Infrastructure Investment Bank (AIIB) soon.

The country signed agreements for $500 million worth of loan from each of the three international financial institutions in the presence of Prime Minister Imran Khan last week.

There is no condition for Pakistan as to how it will utilise the loans. The aim of the concessionary loans is to enable the country to employ all the resources to effectively combat the coronavirus pandemic, improve the life of common man, support businesses and revive economic activities.

Earlier, the International Monetary Fund (IMF), which provided an emergency loan of $1.4 billion to fight Covid-19 in April, in addition to the ongoing $6-billion loan programme, supported Pakistan in utilising all the resources to improve its international payment capability and finance the budgeted expenditures.

Fitch Ratings said in comments last week that Pakistan’s debt-to-gross domestic product (GDP) ratio would reach 89% and would inflate its fiscal deficit to 9.5% of GDP in the outgoing fiscal year and 8.2% in the next fiscal year. It projected a higher fiscal deficit compared to government’s estimate of 9.1% for FY20 and 7% for FY21.

Published in The Express Tribune, June 25^th, 2020.

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