ISLAMABAD -   The government is preparing a roadmap to borrow $10 billion from external sources in next six months to repay previous loans and finance the current account deficit.

“Out of this amount ($10 billion), the government will make payment of around $3.5 billion to International Monetary Fund (IMF) and others while $6 to 7 billion will be used to finance the trade deficit of the country,” said a top official of the ministry of finance wishing not to be named. He informed that roadmap in this regard would be finalized in next few days.

He was of the view that government would approach the commercial banks for borrowing. “The government is in negotiations with some foreign banks and expected to sign more agreements to procure more commercial loans,” he added. The government had already borrowed $1.1 billion from the commercial banks during five months (July-November) of the current fiscal year. The government had projected only $1 billion borrowing from the commercial banks during entire ongoing financial year. However, the government had crossed the limit in just five months to sustain its foreign exchange reserves.

Pakistan’s foreign exchange reserves are under pressure due to the repayment on previous loans and widening of current account deficit. Pakistan’s overall reserves are around $20 billion. Total payments against external public debt during fiscal year 2017-18 were $6 billion out of which $2.4 billion have already been paid. Therefore, the government has to pay $3.6 billion over the remaining period of current fiscal year.

The government had already borrowed $5.4 billion from external sources during five months of the current fiscal year. The government had budgeted foreign assistance of $8.094 billion for 2017-18. However, the government’s borrowing would go beyond the target of $8.094 billion keeping in view the current trend of borrowing from the external sources. The government had targeted to receive $8 billion in foreign loans for the last fiscal year, but it closed the year at a record $10.2 billion. The trend seems to be continuing in the current year.

The independent economists believed that 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. However, out of $20 billion, the government has around $9 billion, which leaves net financing gap of about $11-12 billion.

Meanwhile, the Islamabad Chamber of Commerce and Industry has shown great concerns over the constant rise in foreign debt which has increased by more than 41 percent during the last four years. The ICCI called upon the government to focus on generating indigenous resources to reduce heavy reliance on foreign debt as the increasing foreign debt would further hike the cost of debt servicing and constrain the economic growth of the country.

Sheikh Amir Waheed, President Islamabad Chamber of Commerce and Industry, said that foreign debt of Pakistan was around $ 60.9 billion in 2013, which has gone up to $ 85 billion by September 2017, showing an increase of over 41% during the last four years. He said the constant rise in foreign debt was the major cause of poverty and under-development in the country as Pakistan was spending about 65 percent of its revenue on debt servicing. He said after debt repayment, the country was left with very insufficient financial resources to spend on defense, health, education, development and private sector credit.

He said the further accumulation in foreign debt would weaken economic future of Pakistan as rising debt would consume major portion of future budgets leaving meagre resources for economic development of the country. He said Pakistan’s foreign debt was just around $3 billion by December 1971, but it was unfortunate that over the last 46 years, foreign debt has registered a phenomenal increase of over 2700 percent. It clearly showed that our successive governments have contributed to make Pakistan one of the highly indebted countries as the economic growth of the country never matched with consistent rise in foreign debt. He said it was the need of the hour that Pakistani authorities should reorient economic policies and focus on indigenous resources for the development of the country.