ISLAMABAD: An official report on the disbursement of foreign loans revealed on Tuesday that the government failed to secure $9 billion in debt rollovers last month.
The Ministry of Economic Affairs released its monthly disbursement report, showing that no loans were obtained from foreign commercial banks or bilateral creditors. The government urgently needs to tap for essential foreign funding to stay solvent.
The rollover of cash deposits from China, Saudi Arabia, and the United Arab Emirates, along with raising new loans from foreign commercial banks, are critical prerequisites for the International Monetary Fund’s (IMF) approval of a $7 billion bailout package.
The Ministry of Economic Affairs has included $5 billion in Saudi Arabian debt and $4 billion in Chinese debt as part of the federal government’s rollover plan. However, the $3 billion UAE deposit is accounted for on the central bank’s balance sheet.
The report confirmed that no disbursements were made against these loans last month.
The IMF had initially planned to approve the $7 billion program on August 30 but postponed the decision due to the government’s inability to secure the necessary rollovers. This report marks the first official acknowledgment of the failure to complete these transactions.
The IMF’s new Extended Fund Facility (EFF) assumes that Pakistan will remain current on its external and domestic debt repayments. The $12 billion cash deposit rollover and $4 billion commercial loan are central to the IMF’s debt sustainability plans, yet both the IMF and the government have avoided addressing the urgent need for debt restructuring.
Sources indicated that if Pakistan and Saudi Arabia finalize the sale of 15% shares in the Reko-Diq mining project by early September, Saudi Arabia might expedite Pakistan’s $5 billion rollover request and approve an additional $1.2 billion oil financing facility.
For the current fiscal year, the government has not included the $1.2 billion oil financing facility in its annual $19.2 billion total borrowing plan. However, Finance Minister Muhammad Aurangzeb has already requested the facility from Saudi Finance Minister Muhammad Al-Jadaan.
Last week, the finance minister mentioned that the IMF might approve the new package in September, though he did not provide a specific date.
Any further delay in the $7 billion IMF deal approval could complicate matters for the federal government. Despite imposing a record Rs1.8 trillion in new taxes, the government now faces the additional challenge of a projected shortfall in Federal Board of Revenue (FBR) tax collection.
If the IMF approval is delayed until October, the lender might demand a mini-budget before approving the loan package to address any tax collection shortfalls. The government has set a Rs898 billion tax collection target for the FBR this month. As of Tuesday, the FBR has collected only Rs575 billion, leaving Rs323 billion to be collected in just four days—an average of Rs81 billion per day.
Internal FBR assessments suggest a potential shortfall of around Rs80 billion, which the FBR is now attempting to cover by taking advances from commercial banks, according to sources. Prime Minister Shehbaz Sharif has appointed his trusted officer, Rashid Langrial, as the new FBR chairman. This will be Langrial’s first major test in meeting the target and fulfilling the expectations of the PM’s Office.
The Ministry of Economic Affairs report also noted that the World Bank provided a $132.4 million loan last month, with $11 million allocated to the National Transmission and Dispatch Company (NTDC), $80 million for two flood-related projects in Sindh, and $26 million for a Punjab agriculture project.
The Asian Development Bank (ADB) disbursed $52 million for multiple projects, while China provided $97 million for the Pakistan Multi-Mission Satellite project. Additionally, the country received $128 million from the Naya Pakistan Certificates, which come at a high cost.
However, there were no disbursements against the annual projected budget estimates of $3.8 billion from foreign commercial banks. Pakistan also plans to borrow $1 billion through sovereign bonds this fiscal year, including $300 million through Chinese Panda bonds and $700 million through Green bonds.
I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.
