Foreign bank loans clock in at $1.022bln in July-October

ISLAMABAD: Pakistan’s debt from foreign banks clocked in at $1.022 billion in the first four months of the current fiscal 2017/18, almost half of total foreign loans and much above the annual target, official figures revealed on Tuesday.

The country received a total of $2.452 billion in loans and grants from different international bilateral and multilateral creditors during the July-October period, the Economic Affairs Division’s (EAD) data showed.

Analysts said borrowings from foreign banks are considered as easy mode of dollar inflows as they don’t precede compliance with the Public Procurement Regulatory Authority rules.

Out of total loans and grants disbursements of $2.452 billion received by Pakistan from all multilateral and bilateral creditors, exactly 41.6 percent or $1.002 billion were obtained through commercial banks in July-October.

The rampant commercial borrowings from foreign banks have crossed all the limits. The government set a target of one billion dollars for the whole fiscal 2017/18. It targeted $7.692 billion in loans and grants for the current fiscal year.

Analysts said the government is desperately looking for foreign funds to stop bleeding of foreign currency reserves. Pakistan’s foreign exchange reserves decreased $137 million to $13.541 billion in the week ended November 17, compared with $13.678 billion in the previous week.

In October, the government raised $550 million through foreign banks. In September, the short-term commercial borrowing amounted to $205 million. The government raised $472 million in the first quarter, while $253 million only in July and August.

The analysts said the government is left with no other options but to get commercial borrowings to shore up dwindling foreign currency reserves. EAD data showed that China remained the largest bilateral donor during the first four months as it proved $417.21 million as against the envisaged amount of $1.5 billion.

The Islamic Development Bank (short-term) facility disbursed $455 million in loans during the first four months of 2017/18. Asian Development Bank released $160 million, World Bank $79 million and $53 million in shape of International Bank for Reconstruction and Development and International Development Association facilities, respectively, Japan $33 million, US $22 million and Saudi Arabia $22.5 million.

Officials said the government made all-out efforts to get highly favorable price for borrowing dollars. Economists, however, the government is making last-ditch efforts to demonstrate that the foreign reserves stand at the comfortable level and conveying to the international market that Islamabad should not be labeled as ‘desperate borrower’. The government is already in the international market to raise $2 to $3 billion through issuance of dollar-denominated Euro and sukuk bonds.