Due to difficulties in managing the country’s current account and foreign exchange reserves, the PTI govt was forced to borrow approximately $15.4 billion in foreign loans in the first nine months of the current fiscal year (from July to March), which was more than 70 percent higher than the foreign loans it received in the same period the previous year.
According to the Ministry of Economic Affairs’ monthly report on foreign economic assistance, the country received approximately $12.77 billion in foreign assistance in the first nine months (July-March) of the current fiscal year, which is nearly 72 percent higher than the amount of foreign loans it received in the same period last year.
Following the release of the Ministry of Economic Affairs (MEA) monthly report on foreign inflows, it was revealed that the government had achieved over 89 percent of the total foreign assistance objective set for the entire fiscal year.
However, the MEA does not account for more than $1.6bn of foreign debt held in Naya Pakistan Certificates by Pakistanis living abroad, which is not included in this figure. This does not include the more than $1 billion in loans secured from the International Monetary Fund, which were disbursed in February – the State Bank of Pakistan reports these loans separately from the other loans.
This brings the total foreign debt owed by Pakistan to $49.295 billion from foreign sources (other than Pakistanis) in the first 45 months of the PTI government’s tenure. When little more than $3 billion in IMF funds, on top of $1.4 billion in emergency loans, are taken into consideration, the total amount of foreign loans rises to $54.767 billion in 45 months.
According to MEA data, the size of foreign loans has consistently increased over the last three and a half years, rising from $10.59 billion in 2018-19 to $10.662 billion in 2019-20 and then reaching $14.28 billion in 2020-21, followed by $12.77 billion in the first nine months.
That the government relied heavily on foreign loans to pay the growing current account deficit and maintain foreign exchange reserves in order to finance bigger imports and earlier loans were demonstrated by this.
This was demonstrated by the fact that the annual budget objective for foreign debt in the federal budget 2021-22 was set at $14.088 billion, and that the government borrowed $12.77 billion in the first 9 months of the year. The government had borrowed a total of $14.3 billion during the course of the fiscal year 2020-21.
International capital inflows came mostly from four sources, including $3.95 billion from multilateral lending institutions, followed by $3 billion in time deposits from Saudi Arabia, $2.623 billion in commercial loans from private banks, and $2.041 billion in international bonds.
According to the report, the government received inflows totaling $8.88 billion for budgetary support, which included $1.2 billion in short-term loans as well. This brought the total non-productive (non-project) assistance to $10.114 billion in nine months, compared to the full-year target of $12.16 billion. This meant that more than 80 percent of the total loans were obtained for oil imports, budget financing, and the establishment of foreign exchange reserves.
Approximately $1.82 billion was secured against a variety of foreign-funded projects, and approximately $832 million was secured against publicly guaranteed loans.
According to the data, the government raised $2.04 billion through overseas bonds, compared to a $3.5 billion budget aim for the entire year.
In addition, the government received $2.623 billion in commercial loans from international banks, compared to a total budget objective of $4.87 billion for the entire year. Dubai Bank was identified as the preferred financier, having provided more than $1.14 billion in short-term loans out of a total of $2.6 billion.