The United Kingdom provided the largest component in aid, amounting to $138.2 million in grants. ILLUSTRATION: TALHA KHAN
ISLAMABAD: Pakistan remains in firefighting mode despite availing a $6.7 billion loan from the International Monetary Fund (IMF), as the country received about $1.5 billion or one-fourth of the projected annual foreign funding in the first half of the current fiscal year, underscoring grave challenges for the government in balancing its books.
Receipts for the July to December period of fiscal year 2013-14 stood at $1.5 billion or just 26% of the annual estimate of $5.8 billion, according to documents released by the Economic Affairs Division (EAD).
Out of the $1.5 billion, a sum of $273 million was received in grants, while the remaining was in the form of loans.
The less-than-projected foreign loans have increased external financing requirements that remain significantly higher, much more than the official foreign currency reserves of $3.18 billion that the State Bank of Pakistan (SBP) currently holds.
With this, the chances of an upward revision in the current account deficit target for the second time have increased, according to analysts. Earlier, the IMF revised the current account deficit projection for the current fiscal year from $1.3 billion to $2.3 billion.
Experts believe that the deficit will remain close to $3.5 billion by the end of June this year.
In September last year, Pakistan got approval for the $6.7 billion bailout package from the IMF to avoid a looming default. But the IMF’s decision to disburse the amount in 12 quarterly tranches of roughly $550 million each eroded the benefits that the government was expecting.
The IMF has so far disbursed about $1.1 billion, which is less than what the country has returned to the lender in repayment of the 2008 loan. In the remaining period, the IMF is expected to release two more tranches, provided the country successfully completes the quarterly reviews.
The government seems desperate as it has decided to tap international bond markets without caring for the price that it would have to pay. It is contemplating floating a euro bond next month.
Of the foreign funds, the United Kingdom provided the largest component in aid, amounting to $138.2 million in grants. It had promised to give $224 million in the fiscal year. The assistance mainly came for the Benazir Income Support Programme in addition to education projects in Punjab.
The US disbursed only $31 million under the Kerry-Lugar package, according to official documents. The disbursement was 15% of the annual budgeted amount of $212.7 million.
Flow of funds from Japan, the Asian Development Bank (ADB), the World Bank (WB) and other bilateral lenders was far below estimates. Japan gave $30.7 million or less than a tenth of the projected assistance of $325.8 million, according to the EAD.
Japan is sceptical about Pakistan’s commitment to economic and governance reforms and has linked restoration of budgetary support with the government’s ability to successfully complete the second review of the $6.7 billion IMF programme, said Finance Minister Ishaq Dar last month.
Dar is currently engaged with an IMF team in Dubai where both sides are holding talks under the second review of the programme.
In the first half, aid from China amounted to $186.4 million or 14% of the promised assistance of $1.4 billion for the current fiscal year. It gave a loan of $146.2 million for Chashma III and IV nuclear power plants.
The ADB, the country’s single largest lender, gave $227.7 million or less than one-fourth of the annual commitment of $991 million. The ADB, like the WB, has linked the increase in loans with the government’s ability to introduce meaningful reforms in the energy sector.
The WB gave $214.6 million or just a fifth of the annual commitment, according to the EAD.
The Islamic Development Bank was the only lender that disbursed more than half of the annual commitment. It extended short-term expensive commodity loans of $386 million.
The government also borrowed $100 million from Standard Chartered Bank of the UK to bridge the shortfall.
Published in The Express Tribune, February 7th, 2014.
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COMMENTS (4)
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@Masood Mirza Your points are well taken, also remember each country big or small strives to make decisions it sees at the time for their own interest. If I give you the fact that USA used Pakistan in the incidents you cited is it not our responsibility to learn from past grievances? If you have a so called friend that has a history of treating you in an unacceptable manner how long do you allow the abuse. We cannot accept the billions from America& continue to complain and so far are you comfortable with the billions that have poured from the hard working tax payers of America are being used for the economy & the people of Pakistan? I think all aid from America should be terminated then we can view the collapse of Pakistan & the men in khaki whose affluent life styles will disappear. Also wonders never cease the pro-American moderator if one exists did publish your posts so are you tickled by that?
@Naila Noor: Your advocating USA will not work in the light of history.. The history of Pakistan proves that USA has always used (rather misused) Pakistan for its own objectives and then abandoned it whenever USA’s objective was fulfilled. The USA promised to help Pakistan against Indian aggression in 1971. The 7th Fleet of US Navy didn’t reach in 2 weeks till East Pakistan was separated and the remaining Pakistan was left in high & dry. US Foreign Secretary, Henry Kissinger used Pakistan to reach China and once USA developed its relations with China it started projecting India to counter China and totally abandoned Pakistan. Pakistan was the “frontline state” of USA in the Afghan War that led to disintegration of USSR. When the objective of defeating USSR was fulfilled, the USA once again abandoned Pakistan resulting in the chaos in Afghanistan & Pakistan since 1989-90. The US Government secretly sponsored Taliban and the Taliban’s Commander Mullah AbdulSalam Zaeef was state guest welcomed himself by the then US President Bill Clinton. Pakistan once again became a “frontline state” in USA’s socalled war on terror when the USA wanted to take revenge of 9/11 that had killed some 4000 Americans. This war is being fought on Pakistani soil and has swallowed more than 50,900 Pakistanis (more than 12 times of Americans in 9/11) and has inflicted drastic losses to the economy of Pakistan. It promised to grant US$ 1.5 Billion every year under Kerry-Lugar to help resurrect the economy of Pakistan (shattered due to 9/11 every other day). Disbursement of only US$ 31 million proves another unfulfilled promise of USA! The only good (or bad) that USA does to Pakistan is to sponsor a few pseudo-intellectuals singing the praises of USA every day & night with the dream of becoming US citizen some day!!! I doubt that even the pro-US moderator of ET will really post my factual comments.
So according to @Nida Alvi the amount of millions the US is offering is not enough? Do you think the American people want their hard earned tax money to support a country besieged with corruption, insecurity like Pakistan? With Pakistan sinking daily in the depths of darkness it's a wonder any country bothers to give us any aid. Our Muslim brothers should be giving the majority of aid bit they are too busy using our citizens as slave labors to build their gold guilder towers. I query why the US government & it's people owe anything to Pakistan, even China our old friend has started to loose interest the security situation is deteriorating daily in Pakistan.