Foreign loans fall short by $3.37b
The pledges were somewhere around $7 billion but diplomatic sources said that the rest of the loans did not materialise because the government was unable to provide details of development schemes and was lethargic in addressing transparency issues.
The shortfall forced the authorities to sideline the private sector in credit offtake to meet expenditures.
Official documents have showed that bilateral and multilateral donors had promised almost $7 billion in loans over the financial year ended on June 30 but only made payments of $3.63 billion, a little more than 50 per cent of the total amount.
The final figures have shocked many since the government had initially estimated a gap of about $2 billion between the pledged amount and actual disbursements. The massive shortfall has worried economic managers who rushed to borrow money from domestic market, squeezing out private sector credit.
This has also neutralised the impact of a tight monetary policy, as borrowing from the central bank has fuelled inflation to double digits.
The documents also showed that almost 80 per cent of the undisbursed amount was withheld by two strategic partners of Pakistan, the time-tested China and the United States. The latter has given Pakistan the status of non-NATO ally in recognition of its services in the ‘war on terror’.
China had promised to provide Pakistan with $1.98 billion, but disbursed $212 million, only a little more than 10 per cent of the commitment.
Similarly, the US had committed $1.3 billion for the last financial year, but gave out only $320 million, approximately 25 per cent of the total.
A spokesperson for the US embassy in Islamabad commented that the different dates for start of the financial year in the US and Pakistan created a delay in honouring the commitments. The fiscal year in US commences on October 1, whereas in Pakistan it starts on July 1.
“Tokyo pledges will now be met by Kerry-Lugar money,” he added. The US had promised to give $1 billion over two years at a donor conference held in Tokyo in April last year. The first half of this payment was to be paid out during the last fiscal year.
Furthermore, Germany also provided less than one-third of the amount it had pledged for the year. Its contribution stood at $31 million. Japan disbursed $109 million, 38 per cent of the amount promised. The United Kingdom lent $148 million, 60 per cent less than what was promised while Saudi Arabia fulfilled up to 80 per cent of its commitment, by providing $300 million.
Meanwhile, multilateral donors surpassed their commitment targets - except for the European Union (EU) and the Islamic Development Bank (IDB). The EU honoured merely six per cent of its total commitments, while the IDB over 75 per cent.
On the other hand, the Asian Development Bank and the World Bank lent more than what they promised for the last fiscal year.
A senior official of the Economic Affairs Division commented that disbursements remained below target because of the government’s inability to provide rupee cover against borrowed foreign currency. A change in donor priorities was also given as one of the reasons for the shortfall.
Published in The Express Tribune, July 16th, 2010.
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