ISLAMABAD - Pakistan borrowed $2.9 billion from external sources in the last five months to sustain foreign exchange reserves and its balanace of payment regime that is deteriorating due to the widening of current account deficit.

Pakistan’s foreign exchange reserves are sharply eroding due to the widening of current account deficit (CAD) and repayment of previous loans. The country’s reserves had plummeted by $5 billion in the last one-year. However, at the end of November 2017, the government successfully generated $2.5 billion by issuing Euro and Sukuk bonds in the international market.  Gross foreign exchange reserves held by the State Bank of Pakistan went up by to $14.33 billion, worth three months of import cover. The country’s current overall foreign exchange reserves are $20.4 billion.

Pakistan faces an external financing gap of around $12 billion in the current fiscal year. Pakistan’s gross external financing requirements are around $20 billion including a projected $14-billion current account deficit and $5.9-billion foreign debt repayment ongoing financial year. However, out of $20 billion, the government has around $9 billion, which leaves net financing gap of about $11-12 billion.

The government has borrowed $2.9 billion during first five months (July-November) of the current fiscal year. However, it had not included $2.5 billion generated from the auction of Euro and Sukuk bonds. This amount will notify in the next month data. A major part of the borrowing of $2.9 billion was from the commercial banks that recorded at $1.1 billion during five months of the current fiscal year. The government had projected only $1 billion borrowing from the commercial banks during the entire ongoing financial year. However, the government had crossed the limit in just five months to sustain its foreign exchange reserves.

Sources said that the government is in negotiations with some other foreign banks and expected to sign more agreements in coming months to procure more commercial loans for budgetary support. The government budgeted $2.05 billion for 2016-17 but by the end of the year, it borrowed $4.367 billion from foreign commercial banks.

Economist Dr Ashfaque Hassan Khan said that as the government has decided not to take a new IMF programme, it will either have to issue further bonds in the international market or borrow from commercial banks to finance the gap.

According to official documents, the government had budgeted foreign assistance of $8.094 billion for 2017-18 including $7.692 billion loans and $401.78 million grants. The government had obtained 35 percent of the annual loans in first five months of the year 2017-18. The break-up of loan received showed that the Asian Development Bank has provided $221.88 million, the International Bank for Reconstruction and Development $69.88 million and the International Development Association of the World Bank $106.65 million and the Islamic Development Bank ($660.31 million (short-term loan for July-November period for crude oil import).

Pakistan has also taken $89.44 million from the United Kingdom during the period under review. China has given a loan of $455.25 million to Pakistan. The USA released $25.96 million in the current fiscal year 2017-18 against the budgeted estimates of $117.56 million.