ISLAMABAD - The Pakistan Muslim League-Nawaz (PML-N) government has broken all previous records of taking foreign loans, as it borrowed $40 billion from external sources during its four and half years tenure.

The government is borrowing to maintain its foreign exchange reserves, which are eroding due to the widening current account deficit and repayment on previous loans.

Pakistan has taken loans from all available options, including commercial banks and International Monetary Fund (IMF), and through issuing bonds in international market, according to the official documents.

Pakistan had borrowed $13.38 billion from the multilateral, $5.048 billion from bilateral, $6.7 billion from the commercial banks and $6.4 billion from the IMF by the end of September 2017. Similarly, the government has issued $6.5 billion Sukuk and Euro bonds in the international capital market during the last four years.

Later, the government borrowed $1.24 billion loan from external sources during October and November this year.

Similarly, the volume of domestic debt has also recorded a massive increase in the last four and half years.

Net domestic debt stock had gone up to Rs13,510 billion by the end of September 2017 as against Rs8,686 billion in June 2013 when the incumbent government took charge, showing an increase of Rs4,824 billion.

According to the documents, almost 50 percent of the foreign loans were spent on the repayment of previous loans. The government had repaid $18.3 billion on the previous loans, out of total $36 billion borrowed by the end of September. Similarly, it had repaid $7.38 billion to the multilateral sources, out of $13.38 billion taken from them.

Likewise, it had repaid $3.48 billion to the bilateral, $1.81 billion to commercial banks, $1.25 billion on bonds and $4.41 billion to the IMF, the documents revealed.

The economic experts believe that the reason why the government has borrowed massively is because of the country’s exports plunging by almost $5 billion; remittances reaching the point of stagnation, and foreign direct investment (FDI) half of official projections. Meanwhile, the government borrowed domestic loans to bridge its budget deficit that is increasing due to missing tax collection as well as non-tax collection targets.

The current account deficit (CAD) is widening due to reduction in exports, remittances and FDI as against soaring imports of the country.

The CAD has almost doubled to $6.430 billion in the first five months (July-November) of the current fiscal year of 2017/18 as a widening trade gap offset growth in external inflows on account of foreign direct investment and remittances. The State Bank of Pakistan’s (SBP) figures show that current account deficit stood at $3.371 billion in the corresponding period a year earlier.

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 in the ongoing financial year.

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

Government of Pakistan would have to repay $5.8 billion loans during the ongoing financial year.

The government had repaid $2.4 billion as loans during five months (July-November) of the ongoing financial year, which also included interest rate.