ISLAMABAD: The government’s short-term borrowing from China and other commercial banks rose sharply in the first seven month of the current fiscal year to fund spending following a slowdown of disbursements from multilateral creditors, officials said on Thursday.
Islamabad has secured $1.777 billion as short-term commercial borrowings from different banks in the first seven months (July-Jan) period against envisaged estimates of $1 billion for the whole financial year 2017-18.
“The pace of commercial borrowings demonstrated that it might cross $2 billion mark in the remaining months of this financial year,” an official said.
Official government data showed that total disbursement from all multilateral and bilateral creditors stood at $758 million in January 2018 out of which $532 million were obtained as short-term commercial borrowings from a Chinese bank.
Total disbursements from multilateral and bilateral creditors were $6.882 billion in the first seven months against envisaged target of $8.094 billion for the whole financial year 2017-18.
Owing to steep decline in foreign currency reserves, hardly enough to meet over two and a half month of import bill, the loans in shape of budgetary support are now linked with the International Monetary Fund’s (IMF) letter of support.
These lending agencies are now awaiting the IMF report, expected to be approved by the Fund’s Executive Board next month, which then would be released on the economic health of the country.
The total liquid foreign reserves of the country stood at $18.828 billion on February 16, 2018.
Also, in view of a possible hike in US treasury rates and its impact on the bond market, the government has halted the issuance process of another Eurobond. Instead, the economic managers resorted to commercial borrowings to avoid fast depletion of foreign currency reserves, especially since the current account deficit stood at $9.2 billion during the first seven months of the current fiscal year.
The official data showed that China was the largest bilateral creditor among all the countries, as Beijing provided loan of $608.71 million to Pakistan in the first seven months of the current fiscal year. Pakistan had estimated to get loan of $1.582 billion from China in FY18. China has disbursed loan of $69.4 million in January 18.
Among the multilateral creditors, Islamic Development Bank (IDB) and Asian Development Bank (ADB) were the largest creditors in terms of disbursements of loans, as both of these international financial institutions provided $790 million and $498 million respectively in July-January FY18.
The ADB has disbursed $42.33 million alone in January 2018. The government has envisaged total loan of $1.221 billion from the ADB during FY18.
The World Bank has disbursed loan of $97.41 million in shape of IBRD loan and $192.08 million as IDA credit in the seven-month period. The government was eyeing $975 million in shape of IDA during the whole of FY18.
Among other donors, Asian Infrastructure Investment Bank (AIIB) has disbursed $15.76 million, Canada $0.16 million, EU $5.99 million, France $9.9 million, Germany $15.93 million, IFAD $9.7 million, Japan $71.52 million, Multi Donor Trust Fund (MTDF) $27.95 million, Saudi Arabia $22.5 million, Turkey $5 million, UK $134 million (as grants), US $35 million and through international bonds $2.5 billion in first seven months of FY18.
