As the nation struggles to keep these funding pipelines open, Pakistan obtained record-breaking foreign loans of about $20 billion in the most recent fiscal year, an increase of 27%. These loans were mostly used to pay off aging foreign debt and finance imports.
According to information issued independently by the Ministry of Economic Affairs and the State Bank of Pakistan (SBP), the two governments of Imran Khan and Shehbaz Sharif received about $19.7 billion in foreign loans for the fiscal year 2021–2022 from multilateral, bilateral, and overseas Pakistanis.
The debt was $4.2 billion or 27% more than the year before.
The economic affairs ministry’s data revealed that during the previous fiscal year, which concluded on June 30, it received $16.7 billion in foreign loans.
The loan payout targets, which are primarily intended for project financing but call for extra work, were not met by the ministry, nevertheless.
According to SBP’s records, it received $1 billion from the International Monetary Fund (IMF) and over $2 billion in extremely expensive foreign loans for Naya Pakistan Certificates during the most recent fiscal year.
The goal of almost 82 percent of the new gross foreign loans was to close the budget deficit and maintain the foreign exchange reserves artificially.
The remaining 18% of the loans were used to finance development projects ($2.5 billion) and the construction of a new fighter plane.
The $2 billion loan under the Naya Pakistan Certificates was obtained at an interest rate of 7% in dollar terms, but it may be as high as 11% in local currency.
Loans of $15 billion out of around $20 billion were obtained while Imran Khan was the prime minister.
During its 43-month reign, Khan’s government borrowed a total of $57 billion in gross debts.
The decision-makers appear to be forced to continue borrowing until the economy is set on a sustainable course where the economic wheel is not lubricated by foreign credit.
Due to a halt in the influx of significant budgetary support loans, the nation is having difficulty maintaining its economy.
To keep reserves at current levels until the IMF restarts its lending program, the central bank closely monitors practically every transaction.
To satisfy the $35.1 billion gross funding requirement and be eligible for the IMF board meeting, the finance minister is now looking for $4 billion in financing.
Contrary to what the finance minister informed the media last week, the acting SBP governor asserted on Sunday that there was no financing deficit.
To read our blog on “Pakistan concludes a staff-level accord with IMF for a $1.17bn loan installment,” click here.
