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Govt borrows $2.7bln to repay foreign loans in Jul-Jan

By Our Correspondent
February 27, 2021

ISLAMABAD: Government borrowed $2.7 billion from multiple external financing sources to repay maturing foreign commercial loans during the first seven months of the current fiscal year of 2020/21, according to the latest official data.

The foreign commercial borrowing accounted for 41 percent of total external financing receipts of $6.6 billion, which are 54 percent of annual budget estimates of $12.2 billion for the entire fiscal year, according to the ministry of economic affairs’ monthly bulletin of foreign economic assistance.

In the corresponding period of fiscal year 2019/20, the external inflows were $6.2 billion, which were around 48 percent of the annual budgeted amount of $12.9 billion.

In July-January period, the government received $1.6 billion, or 25 percent of total receipts, as program / budgetary support assistance to restructure Pakistan’s economy.

Of total receipts, $897 million were for financing development projects, $391 million as commodity financing, and $1 billion was received as safe deposits from China.

Monthly bulletin of foreign economic assistance presents the broader view of external inflows and outflows of foreign economic assistance received from multiple financing sources vis-à-vis their budgetary allocations for the entire fiscal year.

The government discharged external public debt obligation of $3.2 billion against the annual repayment estimates of $10.3 billion for FY2021. Of which, $2.6 billion – 82 percent of total external public debt servicing – was repaid as principal and $583 million (18 percent) as interest on the outstanding stock of external public debt.

Foreign assistance is a major source of the foreign capital inflows and has a significant role for the country’s economic development. It is major source of socioeconomic and human resource development and capital formation.

The government receives foreign assistance in the form of project and program financing and technical assistance from various bilateral and multilateral development partners.

Project financing is obtained for financing development projects.

Program financing is generally provided to support government’s budgetary requirements and to help the government in implementing structural and sectoral reforms in the country.

Technical assistance is usually provided by bilateral and multilateral development partners for conducting feasibility studies, institutional development and / or capacity development.

The development partners provide foreign funds on concessional rates with longer maturity ranging from 20 to 40 years. In addition, the government also raises funds from international financial and capital markets from time to time to stabilise foreign exchange reserves and provide budgetary / balance of payments support.

World Bank, Asian Development Bank (ADB), Islamic Development Bank and Asian Infrastructure and Investment Bank are major multilateral while China, Japan, Saudi Arab, Germany, France, UK and USA are main bilateral development partners of Pakistan.

ADB provided $1.1 billion and World Bank ($834 million). France, USA and China provided $34.8 million, $74.4 million and $95.4 million, according to the ministry of economic affairs.