Shying away: Foreign assistance falls behind projections by a third

Disbursements were $1.2b lower than estimate of $3.8b for last fiscal year.

Shahbaz Rana August 17, 2013
Disbursements were $1.2b lower than estimate of $3.8b for last fiscal year. CREATIVE COMMONS


As former rulers struggled to overcome a credibility crisis, combined with deteriorating economic conditions that kept international lenders at bay, Pakistan closed the last financial year with $2.5 billion in foreign funding, falling behind budgetary projections by a third.

A gap of $1.2 billion between the budgetary projections and disbursements brought the country’s foreign currency reserves down by the same amount, which put the rupee under further pressure due to mounting international debt payments.

Pakistan could get only about 68% or $2.53 billion in foreign funding during the last fiscal year 2012-13, against the estimate of $3.8 billion, according to figures compiled by the Economic Affairs Division.

The previous economic team, led by finance minister Dr Abdul Hafeez Shaikh, failed to float a $500 million euro bond. Debt crisis in the euro zone and deteriorating domestic economic conditions restricted it from going to the international market, officials said.

The last government also could not come to some kind of understanding with the United States, Japan, the Asian Development Bank, the Islamic Development Bank and the World Bank, resulting in far less than anticipated disbursements.

The stagnating foreign investment, below potential exports and surging imports and debt payments have increased the country’s dependence on foreign assistance aimed at balancing its books.

The Pakistan Muslim League-Nawaz government has budgeted $5.7 billion in external loans and aid for fiscal year 2013-14, which is 125% higher than the assistance received in the last fiscal year.

In order to ensure the release of these loans, the government has set up a project monitoring unit in the Economic Affairs Division aimed at addressing bottlenecks which may block the inflow.

Despite such ambitious projection, there is a financing gap of $6.5 billion for 2013-14. To bridge the gap, the government is seeking loans from the International Monetary Fund. However, the IMF has not yet indicated that it will disburse the loan in advance as it wants Pakistan to first implement the agreed set of conditions.

The IMF will take a decision on Pakistan’s request for $7.3 billion as well as on the timing for disbursement of tranches in early September.

According to the EAD, disbursements from China and the United Kingdom exceeded the budgetary projections last year. The UK provided $189.2 million, the entire amount in the form of grant. It had promised $82.7 million.

The grant given by the UK was higher than even the US as the Obama administration disbursed only $102.2 million under the Kerry-Lugar package, according to official documents. The US disbursements came to about 57% of the annual budgeted amount of $179.7 million.

The US has committed $7.5 billion over five years under the Kerry-Lugar programme, but documents show a wide gap between commitments and actual releases.

China gave $534.2 million against budgetary projections of $452.4 million. The assistance mainly came for nuclear power plants as Beijing provided $300 million for Chashma 3 &4 plants.

Flow of funds from Japan, the Asian Development Bank, the World Bank, the Islamic Development Bank and other lenders was far below estimates.

Japan had promised $444.4 million in loans and grants, but gave $130.8 million or 29% of the promised assistance. The World Bank, on the other hand, gave $581 million against annual commitment of $763 million, which was 76% of the commitments.

The Islamic Development Bank gave $346 million or 58.5% of the promised amount, including an expensive loan of $256 million. The ADB disbursed $414.8 million or 92% of the budget estimates.

Published in The Express Tribune, August 18th, 2013.

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abdussamad | 8 years ago | Reply

@Gp65: You are one of the commenters here who's comments I love to read. But in this instance you are just nit picking. Almost all aid comes with strings attached. Even grants are given because of ulterior motives. China is a developing country and it IS a BIG DEAL if it is the biggest aid giver to Pakistan in a financial year. There is nothing you can say that will change that fact.

Khalid | 8 years ago | Reply

There are two type of fund flows - grants and loans. In case of loans (WB, ADB, IDB, etc) disbursements are tied to project performance. Low disbursement are a result of government's inability to plan and execute projects. Monitoring is no answer - the fundamental problem is the lack of capacity. The government has over the years failed to build project management capability needed for large/complex projects. They need trained project managers, support Project Management Information Systems and standards. Moral of the story: If you have a problem you fix it - just monitoring it does nothing.

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