According to the Economic Affairs Division, Pakistan inked new agreements worth $8.481 billion as commitments in the first half of fiscal year 2021-22, including $2.484 billion with foreign commercial banks (EAD).
According to the EAD’s quarterly report on foreign economic assistance, signed during the first half of the current fiscal year, new agreements included $1,956 million with multilateral development partners, $3000 million in safe deposits, $1000 million in Eurobonds, and $1,000 million from the international capital market through tap-issuance.
The banks emerged as the main multilateral development partner in terms of fresh promises of foreign economic aid.
The Islamic Development Bank has received $834 million ($762 million in the short term and $72 million in the long term), the Asian Development Bank has received $800 million (40 percent of multilateral partners), and the World Bank has received $800 million (16 percent of multilateral partners).
The amount of foreign economic assistance (FEA) committed by development partners during the observed time period and expected to be distributed in the future five to six years is referred to as new commitments.
After the signing of the “funding instruments” with the development partners, the EAD records the new commitments.
Each instrument is signed by EAD after extensive talks and negotiations with stakeholders, including the Finance Division, the Law and Justice Division, and applicable federal and provincial sponsoring/executing authorities. Furthermore, the foreign loans signed by the Finance Division are documented as “Commitments” in the EAD database.
To stabilize foreign exchange reserves and offer budgetary/balance of payments support, the Finance Division raises funds from international financial institutions and capital markets in the form of foreign commercial loans and the issuing of Eurobonds/Sukuk.
From July to December 2021-22, $7,545 million (or 89 percent of total commitments) was set aside for program financing through foreign commercial banks and Eurobonds to broaden and deepen the financial system, improve fiscal management, and strengthen the regulatory framework in order to boost Pakistan’s growth and competitiveness.
A total of $894 million was set aside for project financing (about 11% of the total commitments).
The government committed $894 million in project financing for the acquisition of COVID-19 vaccinations, Energy/Power, and Education and Training sectors of the economy during the year under review.
To read our blog on “Startups in Pakistan can get bank loans now,” click here.
