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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COMMENTS (11)
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@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.
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.
@abdussamad: Pakistan gave supplier's credit I.e. easy credit terms for those projects where Chinese companies are doing the work. Quite different from outright aid by USA and UK and the untied loans from the development finance organizations.
China has never given grants to Pakistan nor even given soft loans which are untied to projects.
People here love to hate on China but it came through for us last year.
As the British raised the issue.... ++++++++++++++++++++ Why should the British Tax Payer pay aid to Pakistan when the Pakistanis dont themselves pay Tax.
Pakistan needs to look inwards rather than holding begging bowl all the time. Many donor countries have openly criticized that they don't see any benefit coming out of aid that they have given to Pakistan. And they are right because most of this aid has gone in pockets of government officials and their cronies.
Beside all the noise PML (N) been making in PPP tenure it has very little to show that it is doing to control corruption. Start with NAB, which after all these months is still waiting for a chairman. Why FIA has not been streamlined yet to probe more scandals. And why so many judicial opening are still open throughout the country?
@Hari Om
Only to be expected. The simple reality is that to Saudi Arabia, the UAE and Kuwait; being Arab trumps Pakistan's self-belief that she is somehow endowed with a special entitlement to receive aid on the basis of being the sole Muslim nuclear power.
And still government is opting for Laptop Scheme,Motorway, bullet train and Metro.
It appears to me that Pakistan’s friends in the Arab world on whom much hope was placed, have been downright niggardly when it comes to loosening purse strings especially in comparison with Egypt where within a week of the Egyptian military deposing the elected Government of President Mohammad Morsi, a generous Twelve Billion Dollars in aid was pledged. http://www.csmonitor.com/World/Global-Issues/2013/0710/Friends-again-Saudi-Arabia-UAE-jump-in-to-aid-Egypt
Very disturbing; it seems that the world is giving up on Pakistan and losing interest in Pakistan as far as economic assistance is concerned.
Japan had promised $444.4 million Ask any Japanese. They consider "four" an unlucky number because it sounds very close to "foor" in Japanese language which means "death". 444.4 would sound "death, death, death and death" to the Japanese.
The Chinese on the other hand, consider the number four as a lucky number. Don't know the reason for this.