Pakistan took out a record amount of foreign loans of nearly $20 billion in the last fiscal year, an increase of 27%. These loans were mostly used to pay off the foreign debt that was coming due and pay for imports, even though Pakistan is having a hard time keeping these financing lines open.
In fact, the governments of Imran Khan and Shehbaz Sharif received more than $19.7 billion in foreign loans from multilateral, bilateral, and overseas Pakistanis during fiscal years 2021–22, according to information released separately by the Ministry of Economic Affairs and the State Bank of Pakistan (SBP). The amount borrowed was $4.2 billion, or 27%, more than the year before.
The ministry of economic affairs got $16.7 billion in loans from other countries during the last fiscal year, which ended on June 30. But the ministry didn’t meet the loan disbursement goals, which are mostly for financing projects but require more work.
The ministry of economic affairs got $16.7 billion in loans from other countries during the last fiscal year, which ended on June 30. But the ministry didn’t meet the loan disbursement goals, which are mostly for financing projects but require more work.
In the last fiscal year, the SBP got almost $2 billion in expensive foreign loans for the Naya Pakistan Certificates and another $1 billion from the International Monetary Fund (IMF).
About 82% of the new gross foreign loans were used to close the budget gap and keep the foreign currency reserves going artificially. The rest of the 18 percent loans were used for development projects ($2.5 billion) and to pay for a new fighter jet project.
The Naya Pakistan Certificates loan for $2 billion had an interest rate of 7% in dollars, but the return in local currency was up to 11%.
Out of the almost $20 billion, $15 billion was borrowed during Imran Khan’s time as prime minister. During its 43-month rule, Khan’s government borrowed a total of $57 billion.
The government seems to have no choice but to keep borrowing until the economy is put on a path that is sustainable and doesn’t depend on loans from other countries.
During the last fiscal year, Pakistan got $4.9 billion in loans from foreign commercial banks. In June, a group of Chinese commercial banks gave Pakistan $2.24 billion.
Pakistan’s chances of getting big commercial loans and issuing sovereign bonds have gone down since two credit rating agencies changed the country’s outlook to “negative” and its bonds are trading at a discount due to fears of default.
When the publicly guaranteed debt was taken out of the picture, official statistics showed that bilateral project financing loans to Pakistan stayed at $597 million.
Pakistan got $3 billion in cash deposits from Saudi Arabia in the last fiscal year, but the kingdom hasn’t given any money to the new government yet, even though it asked for help.
The finance minister is looking for $4 billion in financing right now to meet the gross financing requirement of $35,1 billion and qualify for the IMF board meeting.
But the acting governor of the SBP said on Sunday that there was no financing gap, which was different from what the finance minister said last week to the media.
Mahnur is MS(development Studies)Student at NUST University, completed BS Hons in Eng Literature. Content Writer, Policy analyst, Climate Change specialist, Teacher, HR Recruiter.
