Business

Pakistan has received $49 billion in last 10 years

Over one-third has been utilised for budgetary support

Shahbaz Rana August 06, 2015

After the IMF, the World Bank remained the largest lender, providing $9.2 billion, followed by the ADB that gave $8.4 billion and the IDB providing roughly $5 billion. PHOTO: FILE

ISLAMABAD:

Pakistan has obtained foreign loans worth $49 billion during the last 10 years and over one-third were utilised for budgetary support instead of creating physical assets, hence raising questions of debt sustainability.

On average, Pakistan received close to $5 billion in fresh loans every year and returned about $2.5 billion to its international creditors, adding the remaining amount to its debt stock.

Repayment amounts for the last couple of years have been increasing due to the $7.7-billion loan Islamabad obtained from the International Monetary Fund (IMF) in 2008.

Read: Deposits increase 10%, growth in loans still low

Out of the $49.2 billion debt that international creditors gave to Pakistan from 2005 to June 2015, Economic Affairs Division (EAD) Secretary Saleem Sethi on Thursday shared details of $30.7 billion with the Senate Standing Committee on Finance, Revenue and Economic Affairs. These loans were signed by the EAD.

In addition, State Bank of Pakistan (SBP) signed two separate loans with the IMF, first in 2008 and the second in 2013, totalling $14 billion.

The total volume of the 2008 loan was $11 billion but disbursement stood at $7.7 billion. The size of the second IMF package is currently $6.2 billion and out of that, $4.2 billion has already been disbursed.

The Ministry of Finance raised another $4.6 billion by floating international bonds from 2005 through 2015.

The Chairman of the Standing Committee, Senator Saleem Mandviwalla, showed concern over the phenomenal growth in external borrowings.

The parliamentarians were also alarmed over the increasing borrowings for budgetary support and governance reforms.

Public debt management remains a matter of concern for the IMF that has been pushing the government to reorganise the Debt Policy Coordination Office.

Like its predecessor, the PML-N government has failed to bring down the debt-to-Gross Domestic Product ratio to within statutory limits of 60%. It has been borrowing in violation of Fiscal Responsibility and Debt Limitation Act that binds the sitting government to keep the total public debt below 60% of GDP.

According to the EAD, out of the total $30.7 billion, multilateral creditors excluding the IMF, gave an amount of $22.8 billion. Bilateral lending during the last ten years stood at $7.9 billion.

Of $30.7 billion, an amount of $11.3 billion was obtained for budgetary support during the last 10 years. In addition, successive governments issued $4.6 billion international bonds to raise funds for budget financing and the IMF approved $1.2 billion under this head. The total budgetary support during last 10 years amounted to $17 billion.

Independent economists are opposed to the idea of borrowing in dollars for financing the budget. They argue that foreign loans should only be obtained for creating assets.

An amount of $5.3 billion was obtained for energy sector projects, $2.9 billion for transport and communication and $2.1 billion loans were obtained in the name of governance reforms. The governance reform is another area where the money is going down the drain. The members asked the Secretary EAD to provide details of the governance reform projects and their intended outcomes.

After the IMF, the World Bank remained the largest lender that provided $9.2 billion in loans, followed by the Asian Development Bank that gave $8.4 billion and the Islamic Development Bank provided roughly $5 billion.

Read: Govt’s loans tally up to $5.1 billion

China remained the single largest bilateral lender that gave $5.3 billion loans, followed by Japan that extended $1.1 billion loans. Saudi Arabia gave $979 million, on average $100 million a year.

HEC privatisation

Meanwhile, the alleged wrongdoings in the failed attempt to privatise Heavy Electrical Complex echoed again on Thursday when the committee showed dissatisfaction over the responses given by the Privatisation Commission. Mandviwalla constituted a sub-committee to further probe the transaction and sought details about the buyer, Cargill Holdings Limited. It also sought details about the meetings of the PC Board including the names of those members who voted to sell the HEC at a throwaway price of Rs250 million.

Published in The Express Tribune, August 7^th, 2015.

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COMMENTS (21)

ali | 9 years ago | Reply its not true, Pakistan have spent far more in terms of resources, this compensation is way too little for the efforts Pakistan was forced to made. China invest in projects which are beneficial to Pakistani people and nation this is what friends do. USA abuses Pakistan.

Avtar | 9 years ago | Reply South Korea received only $15B in aid and is an economic power!! May be Pakistan can show its achievements.

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kdp | 9 years ago | Reply That's little more than 31,500 rupees per Pakistani if population is 146 million people. For a family of four 126000 rupees.

Furkan | 9 years ago | Reply This money has made a lot of people filthy rich..... Poor will remain poor for eternity...

hzr | 9 years ago | Reply @economist: USA gave and China only invests which means it expects a return on investment and in what form this will be only time can tell!

Ishrat salim | 9 years ago | Reply @mahakaalchakra: You seem to have no idea about CSF which Pakistan first has to spend against war on terror then submit details for re-imbursement. It is of ourse invoiced in dollars and it is re-imbursed in dollara and the amount you mentioned $51 billion is highly exagerated,and wrong, by the way cn you gv the link from where you got this figure ?

Sarwar | 9 years ago | Reply It appears not only the readers but the author of the article needs a refresher course in economics. First, development program is part of the budget, so budget support lending by the donors finance the development program as well. Second, when you go for your joy rides in your four-wheelers, or when you buy the inexpensive Chinese products from the market, have you ever thought how are these financed (I mean in terms of dollars). All this is financed by the same borrowings that everybody seems to be questioning. Finally, how did you think country's foreign exchange reserves increased from US$ 6 billion in 2013 to US$ 19 billion by 2015. Just for the commentators from across the borders, if Pakistan's external debt increased by about US$ 21 billion over the last 10 years, India's debt increased By US$ 307 billion over last 6 years. Pakistan debt (as a percent of GDP) is still marginally lower than that of India.

excalibur | 9 years ago | Reply @ mahakalchakraa Where did you get the monkey figure of $51BN as CSF ????? At best it is less than 10 BN and of which 65% was reimbursement of Services renedered on their behalf by Pakistan from logisitics and materials support Rather than worrying about how Pakistan budgets for its military pls look after your own firecrackers

mahakaalchakra | 9 years ago | Reply One has to compute the actual revised budget of Pakistan military (including expenses of manufacturing all types of missiles and almost 120 nuclear bombs and their maintenance cost) as a percentage of its annual TAX revenues added to the interest paid every year for the colossal external and internal debts incurred for keeping bloated army to understand the black hole where all hard earned money of Pakistani public goes.

mahakaalchakra | 9 years ago | Reply This $49 billion is in addition to $51 billion that Pakistan received as CSF as a gift from USA which is used solely by its military.

Naveed | 9 years ago | Reply and what happened to those 49 billion dollars???? no wonder, that's why even Bangladesh is ahead of Pakistan....Bangladesh's 24 billion forex reserve is higher our 16 billion forex reserve....Bangladesh's currency taka is stronger than our currency.....Bangladesh's 6% growth rate is much better than ours.....and in next ten years Bangladesh will be second largest economy of SAARC, if this momentum goes on.....

jayanyt | 9 years ago | Reply in a black pit even if u throw 100 billion , aint nothing back from it !!!!

excalibur | 9 years ago | Reply Fiscal Responsibility and Debt Limitation Act was introduced by none other than Parvez Musharraf. Atleast give him the credit for that Why does the Parliament not invoke action against the govet. that continues to overstep the 60% of GDP limit ???????? All parties including the PTI sleep over it

ThinkTank | 9 years ago | Reply @Anwer Hussain: "Where are 49 billion dollors?" If Pakistan has survived economically until today, it is the $49 billion that you have to thank.

Anwer Hussain | 9 years ago | Reply Where are 49 billion dollors?

observer | 9 years ago | Reply @economist: "So Pakistan received 49 billion dollars and still the economy is in bad shape. We are being told China will invest 46 billion dollars in the next 15-20 years. God only knows " Actually, Pakistan received a lot more than $49B. Pakistan also received in the past 12 years about $50B from the United States directly that was freebie.

Sam | 9 years ago | Reply Can we see the list of projects that got funded by this money? I am sure even those who gave money would like to know

Joe | 9 years ago | Reply @economist: Out of that 46 billion please deduct 14 billion as Gadani project is scrapped. More deductions are underway. In the end Chinese will only build Gwadar which they can use to refuel there ships while journey.

the Skunk | 9 years ago | Reply Wow! That is a lot of money! Higher than Everest, deeper than Pacific, and it can build a ladder to the moon. WHAT DO WE HAVE TO SHOW FOR THIS CAVERNOUS AND GALACTIC DEBT? WE DO HAVE TO PAY INTEREST, DON'T WE? Where is the money? This is what happens when you get financial scoundrels and swindlers into parliament. Salams

economist | 9 years ago | Reply So Pakistan received 49 billion dollars and still the economy is in bad shape. We are being told China will invest 46 billion dollars in the next 15-20 years. God only knows ...

mk | 9 years ago | Reply lost hundreds of billions due to the WOT.

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