Pak­istan's for­eign loans jump to $1.8b in July

The Pak Banker - - FRONT PAGE -

Pak­istan re­ceived $1.8 bil­lion in gross for­eign loans in July - 263% higher than the same month of pre­vi­ous year - due to the pre­ma­ture repayment of $1 bil­lion of Saudi Ara­bian cash as­sis­tance. "In the first month of fis­cal year 2020-21, the gov­ern­ment has re­ceived $800 mil­lion to­tal ex­ter­nal inflows from mul­ti­ple fi­nanc­ing sources," re­ported the Min­istry of Eco­nomic Af­fairs.

How­ever, the min­istry did not re­port the $1 bil­lion in Chi­nese loan that Pak­istan ob­tained late last month to re­turn the Saudi loan.

When con­tacted, a se­nior of­fi­cial of the eco­nomic af­fairs min­istry said that the fi­nance min­istry had not yet re­ported the clas­si­fi­ca­tion of Chi­nese loan, there­fore, it had not been included in the monthly dis­burse­ment fig­ures. Un­der an un­der­stand­ing with the In­ter­na­tional Mone­tary Fund (IMF), Pak­istan had included all Chi­nese loans, in­clud­ing guar­an­teed and non-guar­an­teed, in the pub­lic debt due to the "non-trans­parency" con­cerns raised by the United States.

Later, Pak­istan shifted Chi­nese loans from books of the cen­tral bank to the fed­eral gov­ern­ment books. "The ru­pee cover will be gen­er­ated against the $1 bil­lion Chi­nese loan," said the spokesman for the fi­nance min­istry. The spokesman's state­ment sug­gests that the Chi­nese loan will even­tu­ally be­come part of the pub­lic debt. None­the­less, China did not dis­burse any project loans in July 2020.

In July 2019, Pak­istan had re­ceived $495 mil­lion worth of for­eign loans. Ex­clud­ing $1 bil­lion in Chi­nese loan, the $800 mil­lion dis­burse­ments were equal to 7% of the an­nual bud­get es­ti­mate of $12.2 bil­lion for the en­tire fis­cal year 2020-21, ac­cord­ing to the eco­nomic af­fairs min­istry.

About three-fourths of the of­fi­cially de­clared dis­burse­ments or $585 mil­lion were made on ac­count of bud­getary sup­port, which meant no as­set was cre­ated us­ing the loans and the money would be re­turned by ob­tain­ing more loans.

The to­tal re­ceipt of $800 mil­lion com­prises $585 mil­lion or 73% in pro­gramme and bud­getary sup­port as­sis­tance to re­struc­ture Pak­istan's econ­omy, stated the eco­nomic af­fairs min­istry. An amount of $115 mil­lion or 13% was re­ceived as for­eign com­mer­cial bor­row­ing to re­pay the ma­tur­ing in­ter­na­tional Sukuk and other for­eign com­mer­cial loans and $100 mil­lion or 14% was re­ceived as project as­sis­tance to fi­nance de­vel­op­ment projects for im­prov­ing so­cio-eco­nomic de­vel­op­ment in the coun­try and for as­set cre­ation, added the min­istry.

It stated that in the af­ter­math of Covid-19 and its per­sis­tence in the coun­try the dis­burse­ments of project fi­nanc­ing from de­vel­op­ment part­ners dried up dur­ing the last quar­ter of the out­go­ing fis­cal year 2019-20.

The pan­demic has closed down most of the eco­nomic ac­tiv­i­ties across the coun­try in­clud­ing de­vel­op­ment project ac­tiv­i­ties. How­ever, af­ter the ease in the lock­down by the gov­ern­ment the eco­nomic ac­tiv­ity is re­viv­ing which may lead to jack-up of the project fi­nanc­ing in the cur­rent fis­cal year 2020-21, it added. The bi­lat­eral and mul­ti­lat­eral de­vel­op­ment part­ners have dis­bursed $685 mil­lion of for­eign eco­nomic as­sis­tance dur­ing the fis­cal year 2020-21 against the bud­getary allocation of $5.8 bil­lion for the fis­cal year 2020-21 on con­ces­sional terms with a longer ma­tu­rity, ac­cord­ing to the min­istry.

Amongst the mul­ti­lat­eral de­vel­op­ment part­ners, mainly the Asian De­vel­op­ment Bank (ADB) pro­vided $131 mil­lion. The World Bank dis­bursed $528 mil­lion against the an­nual bud­getary allocation of $2.2 bil­lion. While from bi­lat­eral sources, France and USA pro­vided $23 mil­lion & $1 mil­lion re­spec­tively, it added.

Saudi Ara­bia did not dis­burse any amount against the an­nual $3.2 bil­lion oil fa­cil­ity on de­ferred pay­ments, showed the of­fi­cial statis­tics.

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