Pakistan received $2.2 billion in gross foreign loans in first two months of the current fiscal year, up by nearly 36%, as the share of project financing shrank to a mere 6% of new loans, highlighting the country’s indebtedness.
During the July-August period of fiscal year 2020-21, the government received $2.25 billion in total external inflows from multiple financing sources, said the Ministry of Economic Affairs on Thursday.
The $2.2 billion borrowing was 18% of the annual budget estimate of $12.2 billion for fiscal year 2020-21, it added.
In the same period of last fiscal year, Pakistan had received $1.7 billion, indicating a 35.5% increase in external borrowing during July-August of current fiscal year.
The government has also officially booked $1 billion of Chinese loan as part of public debt, which it had obtained in July to return a Saudi loan. The “$1 billion is received in terms of time safe deposit”, according to the ministry.
Under an understanding with the International Monetary Fund (IMF), Pakistan had included all Chinese loans, including guaranteed and non-guaranteed, in public debt due to “non-transparency” concerns raised by the United States.
Out of the $2.2 billion, the project financing - the money received to create assets - amounted to only $138 million or 6% of the borrowing, according to the economic affairs ministry.
The rest of the amount was on account of budget financing and balance of payments support, which the country will be paying back after taking new loans as no revenue-generating assets were created by using these loans.
The economic affairs ministry said $961 million or 44% was obtained in budgetary support assistance to restructure Pakistan’s economy, $149 million as foreign commercial borrowing to repay maturing international Sukuk and other foreign commercial loans and $138 million as project assistance to finance its development project activities for improving socio-economic development in the country and for asset creation.
The $1 billion Chinese loan was also for balance of payments support.
Bilateral and multilateral development partners disbursed $1.1 billion in foreign economic assistance against the budgetary allocation of $5.8 billion for fiscal year 2020-21 on concessional terms with longer maturity, according to the ministry.
Amongst the multilateral development partners, the Asian Development Bank (ADB) provided $259 million. The World Bank disbursed $531 million against the budgetary allocation of $2.3 billion. From bilateral sources, France gave $23.7 million in loan, the US $24 million and the UK gave $7 million.
The Asian Infrastructure Investment Bank provided $250 million in budgetary support.
The ADB provided $148 million for coronavirus-related emergency assistance and the country also received $35 million in fresh loan from Ajman Bank.
Saudi Arabia did not disburse any amount against the annual oil facility of $3.2 billion on deferred payments, showed official statistics. The facility has remained non-operational since May 2020.
The economic affairs ministry said that in July 2020 total servicing of external public debt was $484 million against the annual repayment estimate of $10.4 billion for the current fiscal year. This included $99 million in interest payments.
In 2020-21, the government settled $51 million worth of foreign commercial loans. Similarly, the government repaid $331 million to multilateral and $102 million to bilateral development partners.
Considering the foreign exchange constraints, the financing of development projects and repayment of a huge external public debt compel the government to further borrow from multiple sources, the economic affairs ministry conceded.
It said around 65% of the total external public debt repaid in July 2020 constituted the repayment of some of the foreign commercial loans and international Sukuk, which were obtained and issued by the previous government. The August repayment figures will be released next month.
The total public debt, which was Rs24.95 trillion during the PML-N tenure, jumped to Rs36.3 trillion in the first two years of the PTI government. The PTI government has added Rs11.3 trillion to the public debt in two years, which is more than Rs10.7 trillion added by the PML-N in five years.
Published in The Express Tribune, September 25th, 2020.
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