ISLAMABAD: The PTI government received about $4.6 billion in foreign loans during the first five months (July-November) of the current fiscal year, taking its total loan inflows to about $40bn since July 2018.

According to a monthly report on foreign assistance released by the Ministry of Economic Affairs (MEA) on Thursday, Pakistan received about $4.699bn inflows, including $4.575bn in loans and about $123 million in grants. The government has a budgetary target to obtain about $14.1bn in foreign loans and grants during the current fiscal year.

The total loans in five months included $2.93bn for programme or budgetary support (non-project aid) and $1.17bn for projects. Of this, multilateral lenders like the Asian Development Bank, World Bank, Islamic Development Bank, Asian Infrastructure Investment Bank (AIIB) and others disbursed a total of about $2bn during the first five months of the current fiscal year.

Commercial banks, including Ajman Bank, Dubai Bank, Standard Chartered Bank and Suisse AG, UBL and ABL, disbursed about $1.53bn. Bilateral lenders like China, the United Kingdom, the United States, Japan, France, Germany and Korea provided $1.041bn to Pakistan.

Total inflows since July 2018 touch $40bn

A few days back, the MEA had reported that total disbursements of foreign assistance during FY2020-21 amounted to $13.547bn, about 27pc higher than $10.7bn in FY2019-20. Disbursements in FY2018-19 had amounted to $10.82bn, taking the three-year total disbursements to $35.1bn. With $4.575bn inflows during the five months of the current fiscal year, total disbursements since July 2018 have reached about $39.65bn.

Total disbursements from multilateral lenders during FY2020-21 ending June 30, 2021, stood at $4.373bn or 33 per cent of total disbursements, led by the ADB at about $1.37bn. An amount of $454m or 3pc of the total disbursements came from bilateral development partners, particularly China, France, the US and the UK, and $4.72bn or 35pc from foreign commercial banks.

About 49pc of total external government debt of $85.6bn by the end of June 2021 came from multilateral lenders, including the IMF, followed by 25pc bilateral external debt and 11pc foreign commercial banks. The remaining 15pc of the external public debt consisted of SAFE deposit and Eurobonds (inclusive of Sukuk).

As of June 30, 2021, 70pc of total external public debt consisted of loans on fixed interest rates, while 30pc on floating interest rates. During the year, the government also paid $9.39bn on account of servicing of external public debt, including $6.94bn in principal and $1.45bn in interest payments.

The MEA has reported that the government contracted $15.32bn worth of new foreign loans from multilateral institutions and commercial banks during fiscal year 2020-21, almost 47pc higher than $10.45bn a year earlier.

With these additional loan agreements, the PTI government contracted a total of about $34.17bn in its first three years in power, according to ‘Annual Report on Foreign Economic Assistance 2020-21’ released by the Ministry of Economic Affairs. Total disbursements of foreign loans in three years stood relatively higher at $35.1bn in three years.

Data showed that Pakistan contracted $8.41bn in FY2018-19, followed by $10.45bn in FY2019-20 (up 33pc) and $15.32bn in FY2020-21 (up 47pc). With this, Pakistan’s external public debt stood at $85.6bn as of June 30, 2021, the MEA said. As of June 30, 2020, the total external public debt had stood at $77.9bn, showing a net increase of about $7.7bn or a growth of about 10pc. The external public debt had amounted to $73.4bn by the end of June 2019.

The report explained that higher commitment during the last fiscal year was made “to mitigate the pressure on the current account deficit, strengthen foreign exchange reserves, enhance external debt servicing capacity and provide requisite financing to water sector development”.

The report noted that out of $15.32bn new agreements, $6.97bn worth of financing agreements were signed with multilateral development partners, $4.66bn with foreign commercial banks and $187m with bilateral development partners. In addition, the government also borrowed $2.5bn from international capital markets through Eurobonds and $1bn from State Administration of Foreign Exchange (SAFE) Authority, China, as deposit.

Of these, an amount of $2bn (13pc of total commitments) was earmarked by multilateral development partners as programme financing to broaden and deepen the financial system and improve fiscal management and regulatory framework to foster growth and competitiveness in Pakistan. Among the multilateral development partners, the World Bank emerged as the largest development partner in terms of new commitments ($4.675bn), followed by Islamic Development Bank ($952m), ADB ($902m) and AIIB ($326m).

Of commercial loans, $4.66bn (31pc of the total) was arranged from foreign commercial banks. An amount of $4.19bn (27pc of the total) was contracted for project financing and $952m (6pc of the total) for commodity financing purposes.

Energy and power were the key priority sector for new loan agreements during the July 2020-June 2021 period with a total share of 35pc out of total committed project financing of $4.19bn. Rural development and social welfare emerged as second priority with a share of 23pc of the total project financing, followed by governance 18pc, finance and revenue 7pc, education 5pc, agriculture 5pc and transport and communication 4pc.

Published in Dawn, December 24th, 2021

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