ISLAMABAD: Struggling with current account challenges and foreign exchange reserves, the ousted PTI government borrowed about $15.4 billion in foreign loans in the first nine months (July-March) of the current fiscal year, more than 70pc higher than the foreign loans it received in the comparable period last year.

In its monthly report on Foreign Economic Assistance, the Ministry of Economic Affairs said it received about $12.77bn foreign assistance in the first nine months (July-March) of the current fiscal year, almost 72pc higher than foreign loans it secured in the comparable period last year.

The monthly report of the Ministry of Economic Affairs (MEA) on foreign inflows showed that the government crossed almost 89pc of the target for foreign assistance set for the whole fiscal year.

This does not include more than $1.6bn of foreign debt in Naya Pakistan Certificates from overseas Pakistanis which are not reported by the MEA. This also does not include more than $1bn secured from the International Monetary Fund which flowed in February — both these loans are reported separately by the State Bank of Pakistan.

With this, the total foreign debt from external sources (other than Pakistanis) reached $49.295bn in about 45 months of the PTI government. The total foreign loans jump to $54.767bn when slightly over $3bn IMF funds on top of $1.4bn emergency loans are also taken into account in 45 months.

The MEA data showed that the size of foreign loans had been steadily increasing over the last three and half years from $10.59bn in 2018-19 to $10.662bn in 2019-20 and then reaching $14.28bn in 2020-21 followed by $12.77bn in first nine months.

This showed the government’s heavy reliance on foreign loans to finance the rising current account deficit and maintain foreign exchange reserves needed to finance higher imports and earlier loans.

This was evident from the fact that the annual budget target for foreign debt was set at $14.088bn in the federal budget 2021-22 and the government borrowed $12.77bn in the first nine months. The government had borrowed a total of $14.3bn in the full 2020-21.

There were four major sources of foreign inflows including $3.95bn of multilateral lenders followed by $3bn of time deposits from Saudi Arabia, about $2.623bn of commercial loans from private banks and $2.041bn worth of international bonds.

The report said the government received $8.88bn worth of inflows for budgetary support which also included $1.2bn of short-term credit. This put the total non-productive (non-project) assistance at $10.114bn in nine months against the full-year target of $12.16bn, which meant that more than 80pc of the total loans were acquired for oil imports, budget financing and foreign exchange reserve build-up.

About $1.82bn were secured against various foreign-funded projects and about $832million for publicly guaranteed loans.

The data showed the government secured $2.04bn through international bonds against a full-year budget target of $3.5bn.

On top of that, the government also obtained $2.623bn in commercial loans from international banks against a full-year budget target of $4.87bn. Of this, Dubai Bank was found to be the financier of choice which provided more than $1.14bn short-term loans out of $2.6bn.

Published in Dawn, April 22nd, 2022