Cash-strapped Pakistan has received just $5.6 billion of debt from foreign lenders in the first half of the current fiscal year, which is almost a quarter of the annual budget estimate. According to data compiled by the Ministry of Economic Affairs, external debt disbursements from July to December 2022 stood at only $5.6 billion, leading to a sharp decline in foreign exchange reserves held by the central bank. In such a situation, our neighbour Pakistan is once again on the verge of poverty and its future looks bleak.
The situation worsened due to not being able to meet the conditions of the IMF
The main reason for the low disbursement of global loans to Pakistan is the government's failure to complete the ninth review of the IMF program on time. As a result, Pakistan received foreign debt of $5.6 billion which was only a quarter of the annual budget estimate of $22.8 billion. Meanwhile, the International Monetary Fund (IMF) announced on Thursday that it would send its mission to Pakistan for talks. However, the conditions listed in its statement indicate that the government will have to make additional efforts to complete the talks by February 9.
Pakistan got only $532 million in debt in December, which was not enough to make major repayments. The country paid USD 828 million to Chinese financial institutions in the last seven days. As a result, official foreign exchange reserves declined to $3.1 billion. About 44 per cent of the loan received in December came from the Asian Development Bank (ADB) which gave USD 231 million. ADB remains the largest lender with disbursements of $1.9 billion so far. This amount is one third of the annual estimate.
The IMF has estimated Pakistan's gross financing needs at $34 billion for fiscal year 2023 and the need to augment foreign exchange reserves at $6 billion. With this, Pakistan's total borrowing will be $ 40 billion. However, the government has budgeted external debt of only $22.8 billion for the financial year 2022-23.
International credit rating agencies have downgraded Pakistan's growth outlook to negative and debt rating status to junk. This limits the country's borrowing options. This has also increased the country's borrowing cost, apart from virtually closing the doors to floating Eurobonds, the report said.
Against the annual estimate of $ 7.5 billion, only $ 200 million has been received so far.
The report quoted sources as saying that against the annual estimate of $7.5 billion, Pakistan has received only $200 million in external commercial credit in the current financial year. The Pakistan government now expects to receive $6.3 billion in commercial credit. dollars, which appears to be at the highest level under the present circumstances.
Pakistan had expressed hope of getting a loan of $ 1.6 billion even under the most expensive Naya Pakistan certificate. In this, $ 190 million, i.e. 11 percent of the annual estimate, has been received so far. Reports said the government this week revised interest rates on these debt instruments and reduced the investment limit to $1,000 wherever possible in desperation to get loans.
The World Bank disbursed around $691 million in the first six months of the current financial year. For the current financial year, the government has estimated an inflow of USD 7.7 billion in loans from multilateral agencies. In the last six months, $ 3.3 billion i.e. 44 percent has been disbursed.
In such a situation, the disbursement made by multilateral agencies due to ADB has been better than the half-yearly estimate. In the first six months of the current fiscal year, the World Bank has disbursed about $691 million, which is 26 percent of the annual estimate.
Not getting full help even from Islamic Development Bank. The Pakistan establishment must rethink the politics and economic policies it has been pursuing in the past to come out of the mess it has been caught into.