Pakistan received foreign loans of less than $9.5 billion during the first eight months of the current fiscal year, but faced problems in securing fresh loans from its two largest multilateral lenders. The country received these loans in the shape of budget and balance of payments support as well as project financing. However, gross foreign exchange reserves held by the central bank remained at $8 billion despite purchasing more than $2 billion from the domestic market.
Disbursements from foreign creditors slowed down during the July-February period of the current fiscal year despite Pakistan having the umbrella of the International Monetary Fund (IMF). The government received only $318 million from foreign lenders in February, with only $222 million from multilateral lenders.
Pakistan also secured $6 billion in deposit rollovers from Saudi Arabia, China and the United Arab Emirates (UAE), taking total external sector inflows to $15.4 billion, or 62% of its needs. The World Bank was the largest lender after the IMF, as it disbursed $1.4 billion in eight months. The IMF has given $1.9 billion out of a $3 billion loan package.
The government is encountering difficulties in achieving the targets of fresh loans from the World Bank and the Asian Development Bank (ADB). The ADB gave only $635 million in eight months, constituting 31% of the annual estimate of $2.1 billion. It seems that the Ministry of Finance and the Ministry of Economic Affairs had set unrealistic targets at the time of announcement of the budget.
The government has not approved the Public-Private Partnership (PPP) policy so far, and the conditions for the Climate and Disaster Resilience Enhancement Programme (CDREP) have not been agreed, with a lack of clarity on the role of different government ministries. The country has not been successful in getting the Geneva pledges fully materialised for the victims of 2022 floods.
China has linked its financing with a prior settlement plan for Rs515 billion that Pakistan owes to the Chinese power plants. Another Chinese commercial loan of $1 billion is maturing in June where Pakistan is seeking its rollover. Bilateral lenders extended $768 million to Pakistan during the July-February period, excluding rollovers.
Despite Pakistan’s budgeting and planning efforts, it is required to repay $11 billion in the remaining period of the current fiscal year. However, it expects rollover of only $6 billion, leaving a gap of $5 billion. The ministry is hoping to receive a $1.1 billion tranche from the IMF, some fresh support from the World Bank and the ADB to make up for the shortfall. The central bank will also buy dollars from the market to support repayments and maintain reserves at current levels.
Please, subscribe to the YouTube channel of republicpolicy.com
