Net foreign transfers reach $3bln in Jul-Feb

ISLAMABAD: The government achieved net foreign transfers of $3 billion so far in the current fiscal year mainly due to higher inflows from multilateral development partners and $1 billion Chinese safe deposits.

For the period July- February, 2020-21, net transfers to the government were $3.045 billion. Positive net transfers came mainly due to higher inflows from multilateral Development Partners & due to $1 billion in respect of time safe deposit from China, Economic Affairs Division said in a report. Interestingly, the stock of external loans which were obtained on market- based instruments has increased merely by $876 million and the share of concessional external loans with longer maturity increased by $1.169 billion. During July-March, the government has received $7.413 billion total external inflows from multiple financing sources, 61 percent of annual budget estimates of $12.233 billion for the entire fiscal year 2020-21.

In the corresponding period of fiscal year 2019-20 the external inflows were $6.730 billion which were also around 52 percent of the annual budgeted amount of $12.958 billion.

The total receipt of $7.413 billion constitutes $1.349 billion or 18 percent as program/budgetary support assistance to restructure Pakistan’s economy; $3.120 billion (42pc) as foreign commercial borrowing to repay maturing foreign commercial loans; and $1.350 billion (20pc) as project assistance to finance development projects activities for improving the socioeconomic development of the country and for asset creation and $439 million (6pc) as commodity financing while $1 billion ( 14pc) received as safe deposits from China.

Disbursement from multilateral an bilateral development partners also maintained a strong trend and is $ 3.294 billion during the period under review against the budgetary allocation of $5.811 billion for fiscal year 2020-21 on concessional terms with longer maturity. These healthy inflows also helped to improve foreign exchange reserves and exchange rate stability. Amongst the multilateral development partners, mainly Asian Development Bank provided $1.247 billion; World Bank disbursed $938 million against the budgetary allocation of $2.257 billion. While from bilateral sources, France, USA and China provided $34.8 million, $86.2 million & $147.5 million respectively. Increased level of external inflows from multilateral and bilateral development partners is indicative of their confidence in development priorities and policies of the government including implementation of reforms in the priority areas of fiscal and debt management, energy sector and ease of doing business. The strong official inflows during the seven-months of current fiscal year helped the government to discharge its external public debt obligation of $4.865 billion against the annual repayment estimates of $10.363 billion for the entire Fiscal Year. Of which, $4.004 billion (82% of total external public debt servicing) was repaid as principal and $862 million (18pc) as interest on the outstanding stock of external public debt. During July-February 2020-21, the government settled $2.429 billion worth of foreign commercial loans.

Similarly, the government has also repaid $1.998 billion to multilateral and $179 million to 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.