ISLAMABAD: Amid external account challenges, Pakistan borrowed about $16.3 billion in foreign loans in first 11 months of the current fiscal year (11MFY22), about seven per cent higher than foreign loans it received in comparable period last year.

In its monthly report on foreign economic assistance, the Ministry of Economic Affairs (MEA) said it received about $13.54bn in foreign assistance in July-April FY22. In the month of May alone, Pakistan received $505 million from foreign inflows.

This does not include more than $1.8bn of expensive foreign debt in Naya Pakistan Certificates from overseas Pakistanis, which is not reported by the MEA. This also excludes about $1bn in International Monetary Fund (IMF)-secured loans that flowed in February—both of these loans are reported separately by the State Bank of Pakistan.

The monthly MEA report on conventional foreign inflows showed that the government crossed 96pc of the $14.09bn target for foreign assistance set for the whole fiscal, ending June 30.

The total international debt received over the past four years starting July 2018 surged to about $58bn, including about $57bn during the tenure of PTI ending April 10. This also included about $5bn from the IMF.

The MEA data showed that the size of foreign loans had been steadily increasing over the last three-and-a-half years, from $10.59bn in FY19 to $10.662bn in FY20 and then reaching $14.28bn in FY21, followed by $13.54bn in 11MFY22. This showed the government’s heavy reliance on foreign loans to finance its rising current account deficit and maintain foreign exchange reserves needed to finance higher imports and earlier loans.

This was evident from the fact that the annual budget target for foreign debt was set at $14.088bn in the federal budget for 2021-22. The government borrowed $13.54bn in 11MFY22. A total of $14.3bn was borrowed by the government in FY21.

There were four major sources of foreign inflows and they included $4.255bn of multilateral lenders, followed by $3bn of time deposits, about $2.623bn of commercial loans from private banks, and $2.041bn worth of international bonds.

The report said the government received $9.181bn worth of inflows for budgetary support and $1.29bn in short-term credit. This brought total non-productive (non-project) assistance to $10.5bn in 11MFY22, compared to a full-year target of $12.16bn, implying that more than 86pc of total loans were obtained for oil imports, budget financing, and foreign exchange reserve building.

About $1.95bn was secured against various foreign-funded projects and about $1.03bn was for publicly guaranteed loans.

The data showed the government secured $2.04bn through international bonds against a full year budget target of $3.5bn. On top of that, the government also obtained $2.623bn in commercial loans from international banks against a full year budget target of $4.87bn.

Published in Dawn, June 30th, 2022