ISLAMABAD   -  Pakistan has taken $6.66 billion loan from external sources in first seven months (July to January) of the current fiscal year to repay previous loans and maintain the foreign exchange reserves of the country.

The government has received $6.66 billion total external inflows from multiple financing sources which are 54 per cent of annual budget estimates of $12.233 billion for the entire fiscal year 2020-21. The amount of borrowing in first seven months of the ongoing financial year is slightly higher than the borrowing made in same period of the previous year. In the corresponding period of fiscal year 2019-20, the external inflows were $6.282 billion which were also around 48 per cent of the annual budgeted amount of $12.958 billion.

The incumbent government is claiming to take new loans to repay previous loans and maintain the country’s foreign exchange reserves. However, Pakistan’s debt is sharply increasing. Pakistan’s foreign debt and liabilities had already swelled to $115.7 billion by December 2020 as compared to $112.7 billion till June-end. Total external debt and liabilities were $110.7 billion till December 2019, according to the State Bank of Pakistan (SBP). The economic experts said that Pakistan’s foreign debt and liabilities are continuously increasing due to falling exports, sharp depreciation of exchange rate, tight monetary policy and a decline in non-debt creating inflows.

The latest figures of Ministry of Economic Affairs (EAD) have showed that Pakistan has taken foreign loan of $6.66 billion in July to January period of the present fiscal year. The total receipt of $6.66 billion constitutes $1.643 billion or 25 per cent as program/budgetary support assistance to restructure Pakistan’s economy; $2.730 million (41 per cent) as foreign commercial borrowing to repay maturing foreign commercial loans; and $897 million (13 per cent) as project assistance to finance development projects activities for improving the socio-economic development of the country and for asset creation and $391 million (06 per cent) as commodity financing while $1,000 million ( 15 per cent) received as safe deposits from China.

Disbursement from multilateral & bilateral development partners also maintained a strong trend and is US$ 2.931 billion during the period under review against the budgetary allocation of $5.811 billion for fiscal year 2020-21 on concessional terms with longer maturity. These healthy inflows also helped to improve foreign exchange reserves and exchange rate stability. Amongst the multilateral development partners, mainly Asian Development Bank provided $1.135 billion; World Bank disbursed $834 million against the budgetary allocation of $2.257 billion. While from bilateral sources, France, USA and China provided $34.8 million, $74.4 million & $95.4 million respectively. Increased level of external inflows from multilateral and bilateral development partners is indicative of their confidence in development priorities and policies of the government including implementation of reforms in the priority areas of fiscal and debt management, energy sector and ease of doing business.

The report of the EAD showed that strong official inflows during the seven-months of current fiscal year helped the government to discharge its external public debt obligation of $3.269 billion against the annual repayment estimates of $10.363 billion for the entire fiscal year. Of which, $2.686 million (82 per cent of total external public debt servicing) was repaid as principal and $583 million (18 per cent) as interest on the outstanding stock of external public debt. During July-December 2020-21, the government settled $1.579 billion worth of foreign commercial loans. Similarly the government has also repaid $1.431 billion to multilateral and $102 million to bilateral development partners. Considering foreign exchange constraints, financing of development projects and repayments of these huge external public debts compel the incumbent government to further borrow from multiple sources.