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Pakistan’s Economy Flourishes with $5.4 Billion Inflows in 2 Months

Pakistan’s Economy

ISLAMABAD: The Economic Affairs Division (EAD) reported that Pakistan’s foreign financing inflows increased over six times to $5.41 billion in the first two months (July-August) of the current fiscal year, compared to just $439 million during the same period last year, thanks to an International Monetary Fund (IMF) stimulus.

In July and August, total Foreign Economic Assistance (FEA) reached $3.2 billion, showing a remarkable 630 percent increase compared to the same period last year when it was $439 million. August recorded total inflows of $316 million, while the majority of assistance, $2.89 billion, arrived in July.

Additionally, Pakistan received $1.2 billion from the IMF on July 13 as the first tranche of the $3 billion Standby Arrangement, and an additional $1 billion from the UAE, separately accounted for by the State Bank of Pakistan.

Bulk of loans came from Riyadh

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

The government had initially estimated about $17.62 billion in foreign assistance in the budget for the current fiscal year, comprising $17.385 billion in loans and $235 million in grants.

Out of the total inflows of $3.206 billion, $2.45 billion was received for budgetary support or program loans, while approximately $760 million was designated as project aid.

During the previous fiscal year, the government had budgeted $22.8 billion in foreign assistance for FY23 but was only able to secure $10.8 billion throughout the year, about 46 percent of the target. This was due to the suspension of the IMF program, resulting in an $11.8 billion slippage and a depletion of foreign exchange reserves.

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

Private commercial banks, which had refrained from involvement due to the absence of the IMF program last year, did not return to Pakistan in the first two months of the current fiscal year, with inflows remaining at zero against the full-year budgetary target of $4.5 billion.

International bonds had completely dried up during the last fiscal year due to a poor credit rating, and the environment did not become conducive for launching fresh bonds.

Regarding multilateral lenders, the World Bank emerged as the largest lender with $178 million in loans in the first two months of the current fiscal year, followed by the Islamic Development Bank with $87 million, the Asian Development Bank with $39 million, the Asian Infrastructure Investment Bank with $16 million, and the International Fund for Agricultural Development with $6 million. Saudi Arabia extended about $2 billion in a time deposit and $200 million in an oil facility, while the United States provided about $12 million in assistance.

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I am a dynamic professional, specializing in Peace and Conflict Studies, Conflict Management and Resolution, and International Relations. My expertise is particularly focused on South Asian Conflicts and the intricacies of the Indian Ocean and Asia Pacific Politics. With my skills as a Content Writer, I serve as a bridge between academia and the public, translating complex global issues into accessible narratives. My passion for fostering understanding and cooperation on the national and international stage drives me to make meaningful contributions to peace and global discourse.

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