Pakistan received a little over $9 billion in foreign loans during the first seven months of the current fiscal year, an amount that was barely enough to meet its financing needs and could not take foreign exchange reserves into double digits.
The Economic Affairs Division on Friday reported the latest disbursement figures for July-January of fiscal year 2023-24, days after the Ministry of Finance revised downward its foreign loans projection by 35%.
The data reported by the Economic Affairs Division and the central bank showed that Pakistan secured $9.2 billion in foreign loans during the first seven months of FY24. Pakistan also secured $6 billion in deposit rollovers from Saudi Arabia, China and the United Arab Emirates (UAE), taking total external sector inflows to $15.1 billion, or 60% of its total needs.
The International Monetary Fund (IMF) has now revised Pakistan’s gross financing requirement to $25 billion on the back of a low current account deficit and the restructuring of $1.2 billion in Chinese-guaranteed debt.
The country received these loans in the shape of budget and balance of payments support as well as project financing. In the month of January, Pakistan received over $1 billion after the IMF released a $706 million loan tranche.
But the gross foreign exchange reserves held by the central bank remained around $8 billion despite purchasing $2 billion from the domestic market.
The finance ministry remained unsuccessful in getting even a dollar in the shape of foreign commercial loans during the first seven months of the current fiscal year. The annual budget estimate on account of commercial loans stands at $4.5 billion.
China has linked its financing of $600 million with the prior settlement plan for Rs493 billion that Pakistan owes to the Chinese power plants.
Another Chinese commercial loan worth $1 billion is maturing in June and Pakistan is seeking its rollover.
Pakistan’s government received only $167 million from multilateral creditors in January, taking the total tally to $2.4 billion for the current fiscal year. The government still expects to receive $5.2 billion from the multilateral creditors during the current year.
The World Bank was the largest lender after the IMF as it disbursed $1.17 billion in seven months. The IMF has given $1.9 billion out of a $3 billion loan package.
Read Pakistan to seek $6b in new IMF loan
The Asian Development Bank gave loans of only $611 million in seven months.
Pakistan has not been successful in getting Geneva pledges fully materialised for the victims of 2022 floods. The Islamic Development Bank has disbursed only $200 million in this fiscal year.
The bilateral lenders extended just $734 million in loans during the July-January period, excluding rollovers. Saudi Arabia gave the highest amount of $595 million under the oil financing facility.
Pakistan also received $595 million from overseas Pakistanis as investment in the Naya Pakistan Certificates.
The Ministry of Finance has this week revised its projections of borrowing from both domestic and external sources. The reliance on domestic sources has substantially increased due to the reluctance of foreign lenders to give new financing due to the country’s poor credit rating despite being under the IMF umbrella.
The Ministry of Finance has slashed the projection of foreign inflows from $17.7 billion to $11.4 billion, a downward adjustment of $6.3 billion, according to the new Annual Borrowing Plan.
The revision has mainly been made on account of projections for Eurobonds and foreign commercial loans.
The Ministry of Finance has dropped plans to float $1.5 billion worth of Eurobonds. It has also cut the estimate of receiving $4.5 billion in foreign commercial loans to just around $2.5 billion.
The report showed the projected inflows from both commercial sources and others category at $3.1 billion. This includes rollover of $1 billion in Chinese commercial loans maturing in June.
A $2 billion worth of Chinese debt is maturing on March 23 and the prime minister has already requested Beijing to roll over the debt. The loan has been obtained at a very high rate of 7.1%.
Published in The Express Tribune, February 24th, 2024.
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