Pakistan took $7.208 billion loans from external sources in eight months

ISLAMABAD-Pakistan has taken $7.208 billion loans from external sources in eight months (July to February) of the current fiscal year that helped to improve foreign exchange reserves and exchange rate stability.

The government of Pakistan has borrowed $7.208 billion as external inflows from multiple financing sources during July-February of fiscal year 2020-21. The amount of borrowing is 59 percent of annual budget estimates of $12,233 million for the entire fiscal year 2020-21. The government has borrowed more in ongoing financial year as compared to the same period of the last year. In the corresponding period of fiscal year 2019-20, the external inflows were $6.282 billion which were also around 51 percent of the annual budgeted amount of $12.958 billion.

The total receipt of $7.208 billion constitutes $1.349 billion or 19 percent as program/budgetary support assistance to restructure Pakistan’s economy; $3.110 billion (43 percent) as foreign commercial borrowing to repay maturing foreign commercial loans; and $1.350 billion (19 percent) as project assistance to finance development projects activities for improving the socio-economic development of the country and for asset creation and $399 million (05 percent) as commodity financing while $1 billion (14 percent) received as safe deposits from China.

Disbursement from multilateral bilateral development partners also maintained a strong trend and is $3.098 billion during the period under review against the budgetary allocation of $5.811 billion for fiscal year 2020-21 on concessional terms with longer maturity. These healthy inflows also helped to improve foreign exchange reserves and exchange rate stability. Amongst the multilateral development partners, mainly Asian Development Bank provided $1.210 billion; World Bank disbursed $909 million against the budgetary allocation of $2,257 million. While from bilateral sources, France, USA and China provided $34.8 million, $76.6 million $95.4 million respectively. “Increased level of external inflows from multilateral and bilateral development partners is indicative of their confidence in development priorities and policies of the government including implementation of reforms in the priority areas of fiscal and debt management, energy sector and ease of doing business,” the ministry of Economic Affairs said in its monthly report on foreign borrowing.

The strong official inflows during the seven-months of current fiscal year helped the government to discharge its external public debt obligation of $4.124 billion against the annual repayment estimates of $10.363 billion for the entire fiscal year. Of which, $3.474 billion (84 percent of total external public debt servicing) was repaid as principal and $650 million (16 percent) as interest on the outstanding stock of external public debt. During July-January 2020-21, the government settled $2.103 billion worth of foreign commercial loans. Similarly the government has also repaid $1.754 billion to multilateral and $103 million to bilateral development partners. Considering foreign exchange constraints, financing of development projects and repayments of these huge external public debts compel the incumbent government to further borrow from multiple sources.

Article source: https://nation.com.pk/20-Mar-2021/pakistan-took-dollar-7-208-billion-loans-from-external-sources-in-eight-months