ISLAMABAD: the incumbent government plans to increase foreign borrowing for budgetary support by threefold in the next fiscal year compared to the proposals in the budget 2018-19.
The budget document released on Tuesday announced that the government is likely to obtain foreign loans worth Rs3.003 trillion compared to Rs1.087tr during the final budget presented by the PML-N government in 2018.
Moreover, borrowing for programmes under the Public Sector Development Programme (PSDP) are expected at Rs211.17 billion, outside PSDP are expected at Rs13.25bn, programme-specific loans are expected to reach Rs276.957bn during the next fiscal year whereas the ‘other loans’ subsector is expected to record massive jump of 256 per cent to Rs2.502tr from bilateral and multilateral sources.
PSDP Loans and Grants
Under the PSDP, the autonomous bodies such as the Water and Power Development Authority are expected to borrow Rs13.73bn, Pakistan Electric Power Company Rs31.611bn and the National Highway Authority Rs57.411bn for various road projects across the country.
The federal government is also expected to obtain loans worth Rs92.29 bn for PSDP projects being executed in the provinces including Rs44.07 bn in Sindh, Rs27.01 bn in Punjab, Rs17.82 bn Khyber Pakhtunhwa and Rs3.38 bn for Balochistan.
However, the government expects that external grants amounting to Rs27.90 bn will be received for PSDP projects being executed in provinces, federal government and the autonomous bodies.
Borrowings outside PSDP
At the same time loans worth Rs13.25 bn has been scheduled in the federal budget for projects outside the PSDP and additional grants worth Rs546 million are scheduled to be available for projects outside the PSDP.
This grant includes Rs516m from Germany for poverty alleviation programme and Rs30m from the Asian Development Bank (ADB) for disaster risk management fund.
In addition to that, the government will also obtain Rs2.25bn for poverty alleviation and Rs1.5 bn for the disaster risk management fund from the ADB.
However, foreign grants have been estimated to decline to Rs28.49 bn in the upcoming budget in both federal PSDP and projects outside the PSDP, compared to the Rs36.68 bn received by the country in the outgoing fiscal year 2018-19.
The government also plans to borrow additional Rs2.502tr ‘other loans’ from multilateral donors, friendly countries and the International Monetary Fund (IMF).
The loans include Rs165bn from Islamic Development Bank (IDB)IDB, Rs480bn from Saudi Arabia, Rs450bn from issuance of International Sukuk and Eurobond, Rs300bn from commercial banks, Rs750bn for budgetary support from various friendly countries and Rs357.45bn from the IMF under the extended fund facility.
The document also acknowledges the utility of foreign financial support if allocated productively and efficiently otherwise developing countries are likely to face financial crises and are caught in debt trap.
Programme Loans and Grants
Programme-related loans include Rs171.819bn from the ADB, Rs15.10bn from the International Bank for Reconstruction and Development and Rs90.03bn from the IDB.
Published in Dawn, June 12th, 2019