ISLAMABAD-Pakistan has borrowed $2.734 billion from external sources in first quarter of the current fiscal year to maintain the country’s foreign exchange reserves. “During July-September of fiscal year 2020-21 the Government has received $2,734 million total external inflows from multiple financing sources which are 22 per cent of annual budget estimates of $12,233 million for the entire fiscal year 2020-21,” the Ministry of Economic Affairs noted in its latest report. In the corresponding period of fiscal year 2019-20, the external inflows were $2,180 million which were around (17 per cent) of the annual budgeted amount of $12.958 billion. In the aftermath of COVID-19 and its persistence in the country the disbursements of project financing from development partners dried up during the last quarter of the outgoing fiscal year 2019-20.

The pandemic has closed down most of the economic activities across the country including development project activities. However, after the ease in the lockdown by the Government the economic activity is reviving which may lead to jack-up the project financing in the current fiscal year 2020-21.

The total receipt of $2,734 million constitutes $1,268 million or 46 per cent as program/budgetary support assistance to restructure Pakistan’s economy; $149 million (5 per cent) as foreign commercial borrowing to repay maturing international Sukuk and other foreign commercial loans; and $317 million (12 per cent) as project assistance to finance its development projects activities for improving the socio-economic development of the country and for asset creation and $1,000 million received in terms of time safe deposits. The bilateral and multilateral development Partners have disbursed $1,585 million of foreign economic assistance during July-September of ongoing fiscal year fiscal year 2020-21 against the budgetary allocation of $5,811 million for fiscal year 2020-21 on concessional terms with longer maturity. Amongst the multilateral development partners, mainly Asian Development Bank provided $637 million. World Bank disbursed $592 million against the budgetary allocation of $2,257 million. While from bilateral sources, France, USA and UK provided $25.3 million, $52.3 million and $13.4 million respectively.

The loan amount would increase in the months to come, as the government is working to issue bonds in international market to increase its foreign exchange reserves, which had started declining due to heavy loan repayment. After completion of all required formalities, the international capital markets will be tapped during January/February 2021, the ministry of finance said. The ministry had already initiated the process for engagement of Financial Advisors, which is expected to be completed by mid-November 2020. After completion of all required formalities, the international capital markets will be tapped during January/February 2021.

Pakistan’s foreign exchange reserves had started depleting due to the repayment against previous loans. The country had paid around $1.4 billion as loan repayment in last three weeks, according to the data of State Bank of Pakistan (SBP). Foreign exchange reserves held by State Bank of Pakistan had declined by $342 million during week ended on 25-September-2020. Later, the reserves had further tumbled by $580 million in the week ended on 02-October-2020. However, the inflow of $300 million from Asian Development Bank (ADB) had helped the SBP in maintaining its reserves.  During the week ended09-October-2020, the SBP made external debt repayment of $507 million.

The total liquid foreign reserves held by the country stood at $19,015.5million on 09-October-2020. Foreign reserves held by the State Bank of Pakistan are 11.798 billion and net foreign reserves held by commercial banks are $7.217 billion.