ISLAMABAD: In the absence of IMF umbrella, Pakistan’s external financing pipeline appeared drying up as it received 40 per cent lower inflows – only $5.596 billion in the first half of the current fiscal year against $9.4bn in the same period last year.
The inflows amounted to just 24.5pc of the $22.8bn budget target implying that without an immediate revival of the fund programme, the country would be unable to meet its external obligations with a higher pace of outflows as the State Bank of Pakistan’s foreign exchange reserves dropped to just above $3bn last week.
In the first five months (July-November), Pakistan had received about $5.115bn in foreign loans, almost 14pc higher than the foreign loans it received in the comparable period last year.
In its monthly report on Foreign Economic Assistance (FEA), the Ministry of Economic Affairs (MEA) said it received about $5.595bn in foreign assistance in July–December 2022 compared to $9.43bn in the same period last year.
Debt inflows plunge amid dwindling forex reserves
In December alone, Pakistan received only $478 million, down 43pc when compared to $842m in November 2022 and $4.56bn in December 2021, a drastic drop.
Inflows of $9.4bn in 1HFY22 accounted for 67pc of the annual budget estimates of $14.1. The MEA had finally reported the full fiscal year 2021-22 foreign economic assistance at $16.975bn.
The foreign inflows reported by MEA also include expensive foreign debt in Naya Pakistan Certificates from overseas Pakistanis and stood at just $190m in 1HFY23 against a full-year target of $1.63bn.
Unlike previous years, there were only three major sources of foreign inflows this year including $4.77bn from multilateral lenders followed by $708m from bilateral lenders and only $200m from commercial banks against a budget target of $7.5bn. This also showed that private commercial banks were shying away in the absence of IMF programme and rock-bottom reserves.
The 4th usual source – international bonds – had dried up because of poor credit rating amid external account challenges and resultantly historically low foreign exchange reserves. The government had targeted $2bn in international bonds for the current fiscal year but no funds could be raised in six months.
Of the multilaterals, the ADB turned out to be the biggest lender with almost double loan disbursements amounting to $1.9bn in 1HFY23 followed by $1.166bn from the IMF whose subsequent disbursement ($1.17bn) planned for the first week of November could not materialise because of differences with the authorities over the completion of 9th review.
The World Bank group disbursed about $688m in six months compared to its $961m during the same period last year. The Beijing-based AIIB followed with $521m disbursements this year so far, up drastically from just $38m during the comparable period of last year. The Islamic Development Bank also extended about $175m including $161m in short-term financing.
Among the bilateral lenders, Saudi Arabia extended about $600m under an oil facility in July-December against a negligible share of just $1m in the comparable period of last year. This was followed by China with $55m, up from $22m last year.
Published in Dawn, February 2nd, 2023
