Last fiscal year, Pakistan took out a record $20 billion in foreign loans, a 27% increase over the year before. This was mostly done to pay off the debt that was coming due and finance imports. The nation now faces a significant problem in maintaining these credit lines.
It is significant to note that, according to information released separately by the Ministry of Economic Affairs and the State Bank of Pakistan, the governments of Imran Khan and Shehbaz Sharif received over $19.7 billion in foreign loans from multilateral, bilateral, and overseas Pakistanis during the fiscal year 2021–2022. (SBP). This emphasizes how critical it is for people like you to continue making donations to fund these vital initiatives.
Data gathered by the economic affairs ministry revealed that $16.7 billion in foreign loans were taken out during the previous fiscal year. Even though the ministry fell short of its goals for loan disbursements, this is still an improvement over the previous year. Due to the importance of these monies for project funding, great care must be taken to ensure their efficient distribution.
The State Bank of Pakistan estimates that we received loans from foreign nations worth close to $2 billion last year, and that number is only rising. We shall find ourselves in an even worse situation down the road if we do nothing now.
The $2 billion loan obtained through the Naya Pakistan Certificates had an interest rate of 7% in US dollars, but it could be as high as 11% in local currency.
These loans were among the almost $20 billion in borrowings that took place when Imran Khan was the prime minister. During its 43-month reign, Khan’s government borrowed a total of $57 billion in gross debts.
It is up to the policymakers to continue borrowing money as long as the economy is not resilient and depends on foreign financing to function.
The loan program from the IMF is essential for the economy of the nation, and the central bank is making every effort to keep reserves in place until the program is restarted.
However, the cost of debt payment has dramatically increased as a result of the increased reliance on loans to boost foreign currency reserves and cover budget deficits. Pakistan got commercial loans of $4.9 billion from foreign banks during the previous fiscal year, including $2.24 billion in June from a group of Chinese commercial banks.
Given that two credit rating agencies changed Pakistan’s outlook from positive to negative and that its bonds are currently selling at a discount due to default fears, Pakistan’s chances of obtaining sizable commercial loans and issuing sovereign bonds have decreased.
Including the government-guaranteed debt, official data revealed that Pakistan had received only $597 million in bilateral funding for project finance.
According to the Ministry of Economic Affairs, Pakistan obtained $1.53 billion in government-guaranteed debt, including $486 million for Karachi’s nuclear power reactors (known as K2 and K3) and $1.03 billion for the fighter aircraft project.
Multilateral creditors granted Pakistan loans totaling $4.7 billion, which was $665 million less than the allocated amount.
The Asian Development Bank (ADB) has the highest rate of disbursement among the multilateral development partners, spending $1.6 billion in the most recent fiscal year. Following closely following, the World Bank released $1.5 billion as opposed to the $2.3 billion budgeted amount. For the import of crude oil, the Islamic Development Bank (IDB) disbursed $1.3 billion.
More than the $3.5 billion it had budgeted for, the government raised $2 billion by issuing long-term bonds. This included $1 billion through the issuing of Sukuk, which are Islamic bonds. At a rate of over 8% percent, this was Pakistan’s most costly Sukuk issuance to date.
In the preceding fiscal year, Pakistan received cash deposits from Saudi Arabia totaling $3 billion. Despite its request for a bailout, the new government has not yet received any payments from the kingdom.
To satisfy the $35.1 gross financing criteria and be eligible for an IMF board meeting, the finance minister is looking for $4 billion in financing. The finance minister last week told the media that there was a financial deficit, while the acting SBP governor stated on Sunday that there was none.