ISLAMABAD: On the back of an International Monetary Fund (IMF) stimulus, Pakistan’s foreign financing inflows rose over six times to $5.41 billion in the first two months (July-August) of the current fiscal year, against just $439 million during the same period last year.

In its monthly report on Foreign Economic Assistance (FEA), the Economic Affairs Division (EAD) said on Tuesday the total FEA in July and August amounted to $3.2bn, compared to $439m during the same period last year, sho­w­ing an increase of 630 per cent.

Total inflows in August stood at $316m, while the maximum $2.89bn assistance came in July.

This is in addition to the $1.2bn released by the IMF on July 13 as first tranche of the $3bn Standby Arrangement and $1bn by the UAE separately accou­nted for by the State Bank of Pakistan.

Bulk of loans came from Riyadh

The bulk — $2bn — of foreign loans reported by the EAD came from Saudi Arabia as time de­­p­o­sit, followed by $508m guaranteed loan to Pakistan Air Force by China National Aero-Techno­logy Import & Export Corpora­tion. The remaining inflows inclu­ded $336m from multilateral agencies and $221m from bilateral lenders. Another $141m flo­wed in from overseas Pakistanis in Naya Pakistan Certificates.

The government has estimated about $17.62bn in foreign assistance in the budget for the current fiscal year, including $17.385bn in loans and $235m in grant.

The EAD said that out of $3.206bn inflows, the bulk of $2.45bn was received for budgetary support or programme loans and about $760m as project aid.

During the last fiscal year, the government had budgeted $22.8bn foreign assistance in FY23 but could actually materialise only $10.8bn throughout the year — about 46pc of the target — because of suspension of the IMF programme, leaving an $11.8bn slippage, resulting in de­­pletion of foreign exchange reserves.

Mainly because of this, the country’s total external public debt slightly declined to $85.2bn as of March 31, 2023 from $86.56bn as of Dec 31, 2022, according to the EAD’s report for the third quarter of last fiscal year ending March 31.

Out of the total external public debt of $85.18bn, the government owed $64bn to multilateral and bilateral development partners, including the IMF, which meant more than two-thirds (75pc) of the total external public debt were on concessional terms with a longer maturity, 16pc ($13.5bn) from international capital markets and foreign commercial banks, and 7pc ($7bn) of the total external public debt deposits from friendly countries like China and Saudi Arabia.

Unlike previous years, Pakistan could tap only three major sources of foreign inflows during the last fiscal year and the trend continued in the first two months of the current financial year. This included over $2.7bn from bilateral lenders and $336m assistance from multilateral lenders and $141m from overseas Pakistanis in Naya Pakistan Certificates.

This also showed that private commercial banks, which had shied away in the absence of the IMF programme last year, have not returned to Pakistan as inflows in the first two months remained zero against full-year budgetary target of $4.5bn.

International bonds had totally dried up during last fiscal year because of poor credit rating and the environment did not become conducive to launch fresh bonds.

Of the multilaterals, the World Bank turned out to be the biggest lender with $178m in loans in the first two months of the current FY, followed by Islamic Develo­pment Bank with $87m, the Asi­an Development Bank with $39m, Asian Infrastructure Inve­stment Bank with $16m, and the Inter­national Fund for Agricultural Development with $6m.

Saudi Arabia extended about $2bn in time deposit and $200m oil facility, followed by the United States about $12m.

Published in Dawn, September 27th, 2023