ISLAMABAD: Pakistan received less than $3.85 billion in foreign loans, almost one-fifth of the annual budget estimate, amid limited borrowing avenues in the wake of poor credit rating and adverse conditions in the global financial markets.

In its monthly report on Foreign Economic Assistance (FEA), the Economic Affairs Division (EAD) on Friday said the country received just $3.847bn in July-October FY24 against its annual target of $17.6bn.

This meant foreign inflows were down by almost 10pc when compared to $4.26bn in the same period last year which was a tough period given the challenging relationship with the International Monetary Fund.

The report on dismal foreign inflows came a day after Caretaker Finance Minister Dr Shamshad Akhtar announced that Pakistan had deferred its plan to launch a $1.5bn Eurobond because of higher interest rates in the international capital markets and the country’s low credit rating. She said Pakistan would repay the existing $1bn bond maturing in April this year that was launched in April 2014.

The EAD report showed the government had budgeted $1.5bn in Eurobond and another $4.5bn in foreign commercial loans during the current fiscal year. According to Finance Secretary Imdadullah Bosal, the Ministry of Finance now anticipated $3.5bn in commercial loans based on the Staff-Level Agreement reached with the IMF over the first quarterly review of the $3bn 9-month Stand-By Arrangement.

He said the ministry was now anticipating a lower-than-budgeted current account deficit, thus the low foreign exchange requirement.

Total inflows recorded by the EAD in October stood at $318 million against $321m in September. Major FEA during the first four months flowed in at $2.89bn in July soon after Pakistan reached an agreement with the IMF for a fresh short-term programme.

This FEA is in addition to $1.2bn released by the IMF on July 13 as the first tranche of SBA and $1bn by the United Arab Emirates that are separately accounted for by the State Bank of Pakistan (SBP). Thus, total foreign inflows including IMF and UAE amounted to $6.05bn.

The bulk — $2.4bn — of foreign loans reported by the EAD came from Saudi Arabia as a time deposit followed by a $508m guaranteed loan to Pakistan Air Force (PAF) by China National Aero-Technology Import & Export Corporation (CATIC).

The remaining inflows included $598m from multilateral agencies and $436m from bilateral lenders. Another $306m flowed in from overseas Pakistanis in Naya Pakistan Certificates (NPCs).

The government has estimated about $17.62bn in foreign assistance in the budget for the current fiscal year, including $17.385bn in loans and the remaining $235m in grants. As such, total loan disbursements in the first four months stood at $3.8bn and $37m in grants.

The EAD said that out of $3.848bn, the bulk of $2.855bn was received for budgetary support or programme loans and about $993m as project aid.

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

Of the multilateral, the World Bank turned out to be the biggest lender with $371m disbursements in July-October followed by $100m from Islamic Development Bank and then $88m from the Asian Development Bank. Asian Infrastructure Investment Bank disbursed $28m followed by $11.4m by International Fund for Agricultural Development.

Published in Dawn, November 18th, 2023