Pakistan receives $13.12 billion loans in 2020-21: EAD

The Economic Affairs Division has shared that Pakistan has received a foreign loan of $12.13 billion in the outgoing fiscal year 2020-21.

The monthly report of Foreign Economic Assistance released by the Economic Affairs Division (EAD) shared that the country received over US$3 billion under multilateral and bilateral loans. The report highlighted that Asian Development Bank (ADB) provided the country with most of the financial assistance that amounted to US$1.28 billion. An amount of Rs417 million was received under the bilateral agreements, the EAD report said, adding that $3.6 billion loans were also given to the government by commercial banks.

During the last month, the EAD in its report said that Pakistan received foreign loans amounting to $10.19 billion during the first ten months of the outgoing fiscal year 2020-21.

During the July-April period, Pakistan received $3.1 billion under mutual agreements, it said in its monthly disbursement report adding that most of the loans have come from the Asian Development Bank (ADB) that stands at $1.26 billion. The Economic Affairs Division further said that mutual agreements with various countries also helped in receiving foreign loans of $376 million.

Another report adds: Pakistan borrowed over $12 billion during the 11 months of the current fiscal year (11MFY21) - an increase of about 63 per cent compared to the same period in FY20.

According to a report by Dawn based on the monthly data for May issued by the Ministry of Economic Affairs, unlike previous year, the government borrowed heavily during FY21 to maintain its improved foreign exchange reserves.

During July-May FY21, the government borrowed $12.13bn compared to $7.44bn in the same period in previous fiscal year, recording an increase of $4.68bn or 62.8pc.

However, about half of the loans were borrowed as commercial loans which mean the interest would be much higher than the loans received from the Asian Development Bank (ADB), World Bank and Islamic Development Bank (IDB). The data shows that inflow of loans during the month May was around $699.7m. However, the government remained close to its target set in the budget for grants and loans.

The budget shows the inflow of grants for FY21 as $275.8m while the 11MFY21 inflow reached at $231.6m. Similarly, the loans estimate in budget was $11.96bn while it reached at $11.90bn during this period. Total public debt was recorded at Rs38 trillion at end March 2021, registering an increase of Rs1.607 trillion during the first nine months of current fiscal year 2020-21.

However, the government said that it was much less when compared with the increase of Rs2.499 trillion witnessed during the same period of last year. It accounted for 79.7% of GDP. Total debt of the government stood at 70.7% of GDP. Domestic and external debt stood at 53.6% and 26.1% of GDP, respectively.

The government said in the Economic Survey 2020-21 released on Thursday that the debt-toGDP ratio of Pakistan is expected to reduce and will remain below 84% at the end of the current fiscal year.

The finance minister, during the unveiling of the economic survey, said that Pakistan's total debt had increased nominally in the last nine months. "Debt is not a good thing but it is, however, necessary," he said, adding that if the fiscal deficit was high it has to be funded it from somewhere. The increase in total public debt during the first nine months of current fiscal year was even lower than the federal government borrowing of Rs2.065 trillion for financing of its fiscal deficit.

The differential is primarily attributable to appreciation of Pak rupee against US dollar by around 9%, which led to decrease in the value of external public debt when converted into Pak rupees. External public debt was recorded at $81.6 billion at end March 2021 increasing by around $3.6 billion during the first nine months of the current fiscal year.

This increase reveals that debt from multilateral and bilateral sources increased by $2.2 billion. This amount also includes $0.5 billion received from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF). Fresh loans from Middle Eastern commercial banks primarily contributed towards this increase. The stock of Pakistan Banao Certificates and Naya Pakistan Certificates cumulatively registered an increase of $0.4 billion.

Gross external loan disbursements were recorded at $7.724 billion during the first nine months of 202021. Disbursements from multilateral sources amounted to $3.397 billion and accounted for 44% of the total disbursements.