Country’s foreign loans jump to $9.43b from $5.67b in first half

ISLAMABAD – Pakistan has taken foreign loans of $9.432 billion from multiple financing sources in the first half (July-December) of fiscal year 2021-22 to maintain its foreign exchange reserves that are depleting due to loan repayment and financing of current account deficit.

The amount of loans has increased after Pakistan had received $3 billion from Saudi Arabia in December last year. The overall amount of foreign borrowing was recorded at $9.432 billion in July to December period of the current fiscal year as against $5.67 billion in the corresponding period of the previous year. 

The government has budgeted estimates of foreign assistance of $14.088 billion for the current financial year. However, it had already borrowed $9.432 billion in just six months. The country had received $4.560 billion from multiple financing sources in December 2021. The total receipt of $9.432 billion constitutes $2.907 billion from multilateral, $150.19 million from bilateral, $2.031 billion from foreign commercial banks, and $1.041 billion from issuance of bonds and three billion dollars time deposit.

According to the fresh data of Ministry of Economic Affairs, Pakistan had borrowed $2.031 billion from foreign commercial banks during the first half of the current fiscal year. The breakup of commercial banks loans showed that country has taken $1.140 billion from Dubai Bank, $487.26 million from SCB (London) including ($9.05 million in December), $61 million from Ajman Bank PJSC, and $343.50 million from Suisse AG, UBL and ABL.

Among multilateral development partners, mainly the Asian Development Bank provided $1.062 billion, the World Bank disbursed $965.73 million, the AIIB $37.77 million, and IDB (S-Term) $800.69 million. China disbursed 1.07 million dollars in December; however, the country received $74.51 million in the first half (July-December) of the current fiscal year, the USA $32.60 million, Korea $3.23 million, the UK $14.54 million, and Germany $12.07 million.

The government is taking foreign loans to build the country’s foreign exchange reserves, which are declining due to repayment of previous loans and financing of current account deficit. The State Bank of Pakistan (SBP)’s held foreign exchange reserves have declined by slightly above $3 billion since August 2021. In just one week time, reserves have declined by $562 million mainly on account of international debt servicing. Reserves held by the SBP have decreased to $17 billion. Meanwhile, the reserves would further come under pressure in the next six months as Pakistan has to repay $8.7 billion in the second half of FY 2022.

According to the economists, the government needs to be highly vigilant about Pakistan’s external financing requirements. These requirements include short, medium and long term debt of the country due during a fiscal year, plus the current account deficit. External financing requirement for Pakistan is likely to exceed $28 billion for FY2022. In addition there is also the Chinese safe deposit of $4 billion which needs to be rolled over.

Article source: https://nation.com.pk/27-Jan-2022/country-s-foreign-loans-jump-to-dollar-9-43b-from-dollar-5-67b-in-first-half