ISLAMABAD: Pakistani authorities were able to materialise about $5.97 billion in foreign loans in the first half of 2023-24, almost one-third of the annual budget estimate amid limited borrowing avenues in the wake of poor credit rating and adverse conditions in the global financial markets despite the support of the International Monetary Fund.

In its monthly report on Foreign Economic Assistance (FEA), the Economic Affairs Division (EAD) on Thursday said the country received $5.968bn in the July-December period of FY24 against its annual target of $17.6bn. This meant foreign inflows were just above $5.595bn in the same period last year which was a tough period given the challenging relationship with the IMF.

The low inflows were mainly because of the adverse international environment and the country’s poor credit rating, making international capital markets a no-go area for Pakistan. Therefore, Pakistan has deferred its plan to launch a $1.5bn Eurobond because of higher interest rates in the international capital markets and the country’s low credit rating.

Caretaker Finance Minister Dr Shamshad Akhtar had already announced to have shelved conventional bonds for the current year even though a $1bn bond maturing in April would have to be repaid.

The EAD report showed that besides the $1.5bn in fresh bonds, the government had also budgeted another $4.5bn in foreign commercial loans during the current fiscal year.

Total inflows recorded by the EAD in December 2023 stood at $1.62bn compared to $416 million in November, up by almost 71pc mainly because of three larger disbursements by three major multilateral lending agencies — $638m by the World Bank, $469m by the Asian Development Bank and $255m by Asian Infrastructure Investment Bank (AIIB).

In October 2023, the country had received $318m in foreign inflows and $321m in September. Major FEA during the first six months flowed in at $2.89bn in July soon after Pakistan reached an agreement with the IMF for a fresh short-term programme.

This FEA is in addition to $1.2bn released by the IMF on July 13 as the first tranche of the $3bn Stand-By Arrangement (SBA) and $1bn by the United Arab Emirates that are separately accounted for by the State Bank of Pakistan (SBP). Thus, total foreign inflows including IMF and UAE amounted to $8.17bn.

Strangely, the EAD had accounted for $1.16bn received from the IMF in the last fiscal year into its FEA inflows but did not depict similar $1.2bn inflows in July this year. Interestingly, the EAD had projected $3bn from IMF last year but only $1.16bn could be materialised following the derailment of its programme soon after the exit of former finance minister Miftah Ismail.

For the current year, the EAD had budgeted $2.4bn from the IMF which later actually committed $3bn in the wake of the signing of a fresh programme worth $3bn that would come to an end in March. The fund has now already disbursed about $1.9bn, leaving behind only $1.1bn subject to the successful completion of the third quarterly review on the margins of upcoming elections.

Published in Dawn, January 19th, 2024