ISLAMABAD           -        Pakistan had received only 58 percent of annual budgeted loan in eleven months (July to May) of the current fiscal year mainly due to the outbreak of Covid-19 as the pandemic has halted the development activities across the country.

The country had received only $7.451 billion from international donors during July-May period of the fiscal year 2019-20 against the budgeted annual amount of $12.958 billion which is around 58 percent. The amount of borrowing in eleven months of the current financial year is less than the external inflows during the corresponding period of FY 2018-19, which were $9.456 billion. “Relatively low disbursements during FY 2019-20 may be attributed to out-break of Covid-19 as the pandemic has completely halted the development activities across the country. Accordingly, every development project got slow down because of the lockdown in the country. However, ease in the lockdown by the government may lead to jack-up the project financing in the coming months,” the Economic Affairs Division noted in its report.

The amount of loan would increase as country had received massive loans from international financial institutions in current month of June. Pakistan has received $1.5 billion in COVID-19 and development policy related assistance from the World Bank, Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB). This was stated by Ministry of Finance in a tweet on Thursday. The Ministry said the Pakistan government is very grateful to its development partners for this critically needed support in such unprecedentedly difficult and uncertain time. Meanwhile, the World Bank has also approved $236 million in grants and credits to support Pakistan’s efforts to enhance learning and healthcare, and address COVID-19 threats to human capital accumulation.

The breakup of loan $7.451 billion, which country received in July-May period, showed that Pakistan had taken $2.333 billion or (31 percent) loan in the form of program/budgetary support aid from Asian Development Bank, World Bank, Korea and U.K. Meanwhile, the country had received $2.073 billion (28 percent) as foreign commercial borrowing to repay maturing international Sukuk of $1 billion and other foreign commercial loans. Similarly, it had borrowed $1.772 billion, to finance its development projects for improving the socio-economic development of the country and remaining $1.583 billion (21 percent) for commodity financing.

The budget estimates of foreign economic assistance through bilateral and multilateral development partners for FY 2019-20 were $4.758 billion. During the first eleven months of current FY 2019-20, an amount of $4,609 million was received from multilateral and from bilateral development partners on concessional terms with longer maturity. Amongst the multilateral development partners, Asian Development Bank provided $2.296 billion, Islamic Development Bank $879 million and World Bank $524 million. While from bilateral source, the leading donors were China ($487 million), UK ($128 million), Korea ($94 million) and USA ($61 million).

The EAD report stated that total servicing of external public debt was $6.530 billion during ten months (July – April) of the current fiscal year as against the budgeted amount of $10.423 billion for the entire fiscal year. Of which, $5,117 million (78 percent of total external public debt servicing) was repaid as principal and $1,413 million (22 percent) as interest on the outstanding stock of external public debt. Around 54 percent of total external public debt repaid during FY 2019-20 constitutes the repayments of some of the foreign commercial loans and international Sukuk which was obtained/issued by the previous government.

During the first ten months of current fiscal year, the government settled $2,077 million worth of foreign commercial loans and repaid $1 billion worth of international Sukuk issued in December, 2014. Similarly the government has also repaid $1,760 million to multilateral and $723 million worth of external loans of 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.