ISLAMABAD: Pakistan received only about $11.3 billion in foreign loans and grants in the first 10 months (July-April) of the current fiscal year, far behind the annual target of $17.4bn. This is amid major slippages in raising international financial support, although it has met the revised target.

According to official data released by the Ministry of Economic Affairs, the country received about $237 million in foreign loans in April compared to $204m in March and $318m in February.

It said the government could materialise about $7.142bn in foreign economic assistance (FEA) in the first 10 months of outgoing FY24, almost 41 per cent of the annual budget target, amid limited borrowing avenues.

This is in the wake of poor credit ratings and adverse conditions in the global financial markets despite the support of the International Monetary Fund (IMF).

This FEA is in addition to $3bn released by the IMF under the Stand-By Arrangement (SBA) and $1bn by the United Arab Emirates, which is separately accounted for by the State Bank of Pakistan (SBP).

Thus, total foreign inflows, including the IMF and UAE, amounted to $11.24bn in 10 months. This generally works out to be almost 65pc of the full-year targeted inflows.

However, authorities claim better debt and trade management has reduced the current year’s foreign assistance requirements. Thus its target is now tentatively revised to around $11bn instead of the $17.62bn set in the 2023-24 budget for FEA.

They are now predicting the current account deficit to be around $2bn instead of the $6bn budget estimate.

In its monthly FEA report for April, the MEA said the country received $7.142bn in July-April FY24 against its annual target of $17.62bn. This meant foreign inflows were over 12pc lower than the $8.124bn of the same period last fiscal year, which was otherwise a very 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 had to defer its plan $1.5bn Eurobond because of higher interest rates in the international capital markets and the country’s low credit rating.

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

Total inflows recorded by the EAD in April came in at Rs237m compared to 204m in March, $333m each in January and February and $1.62bn in December.

It may be noted that December 2023 had seen three larger disbursements by three major multilaterals — $638m by the World Bank, $469m by the Asian Development Bank and $255m by the Asian Infrastructure Investment Bank (AIIB).

In October, the country had received $318m in foreign inflows and $321m in September. Major FEA during the first ten months flowed in at $2.89bn in July 2023 soon after Pakistan reached an agreement with the IMF for a fresh short-term programme and then $1.34bn in April when the IMF released its final $1.1bn tranche on April 29.

Strangely, the EAD had accounted $1.16bn receipt from the IMF in the last fiscal year into its FEA inflows but did not depict similar $3bn inflows 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 and disbursed $3bn in the wake of the signing of the 9-month SBA that expired last month.

The bulk — $2.63bn — of foreign loans reported by the EAD in 10 months came from Saudi Arabia as a time deposit and oil facility followed by $1.525bn from the World Bank, $708 million from ADB and a $508m guaranteed loan to the Pakistan Air Force by the China National Aero-Technology Import & Export Corporation.

Total inflows from multilaterals excluding the IMF stood at $2.678bn in 10 months of the current year, as compared to $4.135bn in the same period last year.

Inflows from all bilateral lenders, excluding Saudi Arabia, stood at $815 million in 10 months. Another $889.4m flowed in from overseas Pakistanis in Naya Pakistan Certificates (NPCs).

The government has estimated about $17.62bn in foreign assistance in the budget for the current fiscal year, including $17.39bn in loans and the remaining $235m in grants. As such, total loan disbursements in the first 10 months stood at $7.01bn and $132m in grants.

The EAD said that out of $7.142bn, the bulk of $4.84bn was received for budgetary support or programme loans and about $2.3bn as project aid.

Published in Dawn, May 25th, 2024

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