ISLAMABAD: Pakistan received only about $11.7 billion in foreign loans and grants in the first 11 months (July-May) of outgoing FY24, far behind the annual target of $17.4bn. This is amid major slippages in raising international financial support, although it has met the revised target.

According to official data released by the Ministry of Economic Affairs (MEA), the country received about $403 million in foreign assistance in May, up from $237m in April.

It said the government could materialise about $7.547bn in foreign economic assistance (FEA) in the first 11 months of the current fiscal year, almost 44 per cent of the annual budget target, amid limited borrowing avenues. This is in the wake of poor credit ratings and adverse conditions in the global financial markets despite the support of the International Monetary Fund (IMF).

This FEA is in addition to $3bn released by the IMF under the Stand-By Arrangement (SBA) and $1bn by the United Arab Emirates, which is separately accounted for by the State Bank of Pakistan (SBP). Thus, total foreign inflows, including the IMF and UAE, amounted to $11.7bn in 11 months. This generally works out to be almost 67pc of the full-year targeted inflows.

However, the authorities claim that better debt and trade management have reduced the current year’s foreign assistance requirements. Thus, its target for FEA is now tentatively revised to around $11bn instead of the $17.62bn set in the 2023-24 budget based on a lower current account deficit than budget estimates.

In its monthly FEA report for May, released with a rare fortnight-long delay, the MEA said the country received $7.747bn in the first 11 months (July-May) of outgoing FY24 against its annual target of $17.62bn. This meant foreign inflows were over 12.4pc lower than the $8.613bn of the same period last fiscal year, which was otherwise a very tough period given the challenging relationship with the IMF.

The low inflows were mainly because of the adverse international environment and the country’s poor credit rating, making international capital markets a no-go area for Pakistan. Therefore, Pakistan had to defer its plan $1.5bn Eurobond because of higher interest rates in the international capital markets and the country’s low credit rating. The EAD report showed that besides the $1.5bn in fresh bonds, the government had also budgeted another $4.5bn in foreign commercial loans for the current fiscal year that did not materialise.

In December 2023, the country secured three larger disbursements for $1.36bn from three major multilaterals — $638 million by the World Bank, $469 million by the Asian Development Bank and $255m by the Asian Infrastructure Investment Bank (AIIB). Major FEA in 11MFY24 flowed in at $2.89bn in July 2023, soon after Pakistan reached an agreement with the IMF for a fresh short-term programme, and then $1.343bn in April when the IMF released its $1.1bn final tranche on April 29.

For FY24, the EAD budgeted $2.4bn from the IMF, which later committed and disbursed $3bn after signing a 9-month SBA that expired in April.

The bulk — $2.66bn — of foreign loans reported by the EAD in 11MFY24 came from Saudi Arabia as a time deposit and oil facility, followed by $1.714bn from the World Bank, $766m from ADB, and a $508m guaranteed loan to Pakistan Air Force (PAF) by China National Aero-Technology Import & Export Corporation (CATIC). Total inflows from multilaterals, excluding the IMF, stood at $3.135bn in 11MFY24, compared to $4.45bn in the same period last year.

Inflows from all bilateral lenders, excluding Saudi Arabia’s $2bn time deposit, stood at $889m in 11 months. Another $1.015bn flowed in from overseas Pakistanis in Naya Pakistan Certificates (NPCs).

The government had estimated about $17.62bn in foreign assistance in the budget for FY24, including $17.385bn in loans and the remaining $235m in grants. As such, total loan disbursements in 11MFY24 stood at $7.4bn and $144m in grants.

The EAD said that out of $7.55bn, the bulk of $4.98bn was received for budgetary support or programme loans and about $2.566bn as project aid.

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

Unlike previous years, Pakistan could tap only three major sources of foreign inflows during the preceding fiscal year, and the trend continued until 11MFY24.

Published in Dawn, July 4th, 2024