Pakistan foreign borrowing soars to $6.7b

As Pakistan's financial debt continues to mount, the Imran Khan government received USD 6.7 billion in gross foreign loans in the first seven months of the current fiscal year, including a new commercial loan of USD 500 million from China last month.

According to The Expresss Tribune, Ministry of Economic Affairs reported that during the July-January period of fiscal year 2020-21, the government obtained USD 6.7 billion in external loans from multiple financing sources. The gross loans were higher by 6 per cent or USD 380 million over the same period of the last fiscal year.

In January alone, the government received USD 960 million in foreign loans, including USD 675 million from commercial banks, which were the most expensive loans. Out of the USD 6.7 billion, an amount of USD 2.7 billion or 41 per cent of the total loans were on account of foreign commercial loans, said the ministry.

The Express Tribune further reported that nearly 87 per cent of the foreign loans or USD 5.8 billion were for budget financing, building foreign exchange reserves and commodity financing.

"The country would be paying back those loans after taking new loans as no revenue-generating assets were created by using the loans. Project financing was a mere USD 897 million or 13 per cent," it reported.

China's continued financial assistance to Pakistan has helped in keeping the gross official foreign exchange reserves at around USD 13 billion despite the suspension of the International Monetary Fund (IMF) programme, negative growth in exports and major debt repayments to Saudi Arabia and other creditors.

Ahsan Munir, a columnist for The Nation said that the Pakistani parliament "legislate less and fight more" over the allocation of development funds for their constituencies-more in the ambit of the local government bodies.

"All governments which come to power comprise different interest groups, which promote their vested interests and pay little attention to the economic side of governance. Resultantly, billions of dollars have been borrowed from external and internal sources for which the country has nothing to show for," he wrote.

The latest tranche of sovereign gold bonds will open for subscription on 1 March 2021.

State-owned enterprises, such as PIA and Pakistan Steel Mills have been bankrupted; and utility distribution companies are running into losses for reasons unfathomable to an income taxpayer, who not only pays his bill but also of those from which the government fails to collect, the columnist pointed out.

"All our ruling parties conjure up initiatives that are trumpeted to be game changers for the ordinary masses of this nation. But all these initiatives only add to the debt woes of this country," Munir wrote

This comes as Pakistan's foreign debt and liabilities have mounted by USD 3 billion or 2.6 per cent during the six months period ended in December last year, the central bank's data reported last week.

Pakistan secured a debt relief of USD 1.7 billion from the G-20 countries, together with the Paris Club creditors under the debt service suspension initiative, announced to provide fiscal space to stressed economies hurt by the Covid-19 and lockdown.