The influx of foreign loans slows down.
Due to the delay in the IMF’s 9th assessment, Pakistan will only receive one-fourth of the budget estimate.
ISLAMABAD: Because Pakistan delayed making a decision to restart the International Monetary Fund (IMF) loan programme, it only received $5.6 billion in foreign loans during the first half of the current fiscal year, or roughly one-fourth of the annual budget estimate.
Data gathered by the Ministry of Economic Affairs revealed that only $5.6 billion in foreign loan disbursements were made from July through December 2022.
The payments were insufficient to cover the maturing foreign debt, severely depleting the central bank’s foreign exchange reserves.
The government’s failure to ensure the prompt completion of the IMF program’s ninth review was a major factor in the low payouts. As a result, the $5.6 billion in receipts represented only one-fourth of the $22.8 billion yearly budget estimate.
The IMF said on Thursday that it will send a mission to Pakistan for negotiations, but the string of requirements mentioned in its statement suggested that the government would need to go above and beyond to reach a deal by February 9.
In December, Pakistan only received $532 million in loans, which was insufficient to cover significant repayments.
The nation has given Chinese banking institutions $828 million in the last seven days. The official foreign exchange reserves decreased as a result, falling to $3.1 billion.
The Asian Development Bank (ADB), which contributed $231 million, provided loans totaling almost 44% of those received in December. The ADB has so far maintained its position as the top lender, disbursing $1.9 billion, or one-third of the annual forecast.
Pakistan’s gross finance requirements for FY23 have been estimated by the IMF at $34 billion, with an additional $6 billion for boosting the reserve buffer of foreign currency, bringing the total amount borrowed to $40 billion. For the fiscal year 2022–2023, the government has only earmarked $22.8 billion for foreign borrowing.
After the international credit rating agencies lowered Pakistan’s outlook to negative and debt rating to junk status, the country’s borrowing options remained constrained. In addition to raising the cost of borrowing for the nation, this has all but eliminated the market for floating Eurobonds.
According to sources, Pakistan has only gotten $200 million in foreign commercial loans in the current fiscal year compared to the $7.5 billion yearly estimate. The amount of commercial loans the government now anticipates receiving, $6.3 billion, seems to be on the higher side.
Due to Pakistan’s subpar credit rating and anticipated high interest rates, the $2 billion in sovereign bond-based borrowing that was planned for the country never materialised.
