KARACHI: The PMLN-led coalition government could secure $10.844 billion in bilateral, multilateral and commercial loans against the budgetary target of $22.817bn in the outgoing FY23, showed data released by the Economic Affairs Division (EAD).
The government received 47.5pc less than the target despite aggressive efforts to boost foreign exchange reserves and narrowly escaped the default just at the end of the FY23 by signing a nine-month $3bn Stand-By Arrangement (SBA) with the IMF after complying with harsh conditions.
The inflow of foreign loans in FY23 was 37pc less when compared with $16.9bn in FY22 creating serious problems for Pakistan to meet external obligations.
Without the IMF umbrella, the government even could not execute a plan to raise $2bn through an international bond issue given the poor health of foreign exchange.
The data showed that the country failed to borrow from commercial banks mainly due to precarious external account positions. The thin foreign exchange reserves and fear of default slashed the government’s ability to borrow from commercial banks. It borrowed just $2.2bn from commercial banks against the target of $7.472bn, a shortfall of $5.3bn.
The country received just $1.2bn from the IMF during FY23 against an expectation of $3bn.
Also, it attracted just $788 million under Naya Pakistan Certificates against the estimate of $1.6bn in FY23.
Analysts are doubtful about the country’s ability to launch bonds even in FY24 as the $3bn SBA has failed to boost confidence in the financial market. The local currency could not improve its health despite doubling of foreign exchange of the SBP from $4.5bn to $8.7bn.
The dollar kept pressing the local currency and continued depreciation created a depressing situation for the stakeholders of the economy.
The tough IMF conditions, mainly record-high interest rates, have already hampered investments which are required to improve the economic growth rate.
“Market is concerned with the rapid fall of the rupee, which depreciated by about Rs8 per dollar last week. With SBP’s instructions to banks to manage import payments themselves, banks are in a race to fund their nostros, eagerly buying dollars,” said Faisal Mamsa, CEO of Tresmark.
Some banks are giving rates of over 7pc on dollar accounts to lure in new deposits, he said.
“With the ‘go slow’ on opening letters of credit (LCs) still in place, analysts expect the rupee to consolidate in the range of 286-290, especially as Asian Development Bank and World Bank’s commitment will start to materialise and China’s rollover of $600m will boost liquidity,” said Mr Mamsa.
However, some analysts believe that both exports and remittances would remain under pressure in the current fiscal year due to higher costs of production and big offers by the grey market.
The grey market usually offers Rs15 to Rs20 more than the open market rate. The last working day price in the black market was 305.
The EAD data showed the government received $5.224bn from multilateral sources against the expectation of $7.675bn in FY23.
However, the country received higher than the budgeted target through bilateral sources. The total amount received was $1.458bn against the estimate of $1.039bn.
Published in Dawn, July 23th, 2023
