ISLAMABAD: Mainly supported by the International Monetary Fund (IMF) programme, Pakistan has secured $1.622 billion foreign inflows in the first two months (July-August) of the current fiscal year – almost 100 per cent higher than $820 million last year.

The latest data of the Economic Affairs Division on foreign assistance, a classification in which they include loans and grants, shows foreign inflows amounted to Rs258.6bn ($1.622bn) in two months compared to Rs102.67bn ($820 million) of the same period last year.

The full year target of foreign inflows is Rs3.032 trillion (about $19bn) for the whole financial year 2019-20 against last year budget target of $9.7bn (Rs1.113 trillion). Last year the government secured about $16bn in loans, including one-off injections by Saudi Arabia, China and the UAE.

The EAD data showed that Pakistan received about $919m (Rs146bn) from multilateral lenders, $321.5m (Rs51.7bn) from commercial loans and $382m (Rs61bn) from bilateral lenders.

Of $19bn target set for current fiscal year, govt secures $1.622bn foreign loans, grants in two months

Of the $321.5m commercial loans, the biggest chunk of $148m was provided by the CitiBank, $123.3m by Dubai Bank and $50m by Suisse AG, United Bank Limited and Allied Bank Limited.

Out of $919m assistance from multilaterals, the Asian Development Bank provided the highest share of $529m, followed by $285m by the Islamic Development Bank, $83m by the World Bank Group and $22m by the International Fund for Agriculture Development (IFAD).

Among the bilateral lenders, China stood on top of the list with $158m loan, followed by Saudi Arabia with $108m loan, $81m by the UK, $16m by Japan, $12m by the US and $6.58m by Germany.

The total foreign inflows overwhelmingly comprised $1.49bn loans and $132m grants.

The data showed that in the first two months of 2018-19, China had stood on the top position with $297m, followed by $200.5m of Islamic Development Bank, $75m of the Asian Development Bank. During the same period last year, total loans provided by the commercial banks stood at $70 million.

The ADB made the biggest loan disbursement of $500m for trade and competitive project, while Chinese loan flow of $158m was meant for Sukkur-Multan Motorway, Lahore Orange Train and Havelian-Thakot Karakoram Highway section.

Officials said the better foreign assistance disbursements were primarily supported by the IMF’s umbrella programme that promised $6bn financing in three years. However, the IMF programme provides a comfort to the lending agencies, bilateral lenders, capital markets and the commercial banks to make available their financing windows under which the IMF and Pakistan authorities are expecting total inflows of more than $37bn in three years.

They said the budgeted inflows were meant for longer term project and programme financing and flow into the system as part of the balance of payment support. Pakistan expects current account financing requirement for current fiscal year at about $8bn against $13bn last year.

Last week the IMF said Pakistan’s economic programme was off to a promising start, but decisive implementation was critical to pave the way for stronger and sustainable growth as the domestic and international risks were still there and structural economic challenges persist. Therefore, it said, the authorities need to press ahead with their reform agenda.

While acknowledging that there had been progress in some key areas, the IMF pointed out that the government’s economic reform programme was still in its early stages. “The transition to a market-determined exchange rate has started to deliver positive results on the external balance, exchange rate volatility has diminished, monetary policy is helping to control inflation, and the SBP [State Bank of Pakistan] has improved its foreign exchange buffers,” the IMF observed.

Published in Dawn, September 24th, 2019