ISLAMABAD:
Foreign loan disbursements and the rollover of existing debt jumped to $11.5 billion during the first seven months of the current fiscal year as the government disclosed that it had received $306 million in Chinese lending for the construction of a nuclear power plant.
The Ministry of Economic Affairs on Tuesday released details of foreign loans for the July-January period of fiscal year 2024-25.
The debt bulletin and a separate announcement of the central bank showed that combined foreign loan receipts and rollovers increased to $11.5 billion during July-January FY25. This includes $5.5 billion in fresh loans and $6 billion worth of rollovers by Saudi Arabia, the United Arab Emirates (UAE) and China.
The economic affairs ministry reported that during the seven months, bilateral and multilateral lenders disbursed $4.5 billion, excluding the International Monetary Fund’s (IMF) first loan tranche. After adding the IMF installment, the disbursement reached $5.5 billion.
Saudi Arabia rolled over $3 billion in December, the UAE rolled over $2 billion in January and China rolled over $1 billion in July last year.
For the current fiscal year, the federal government and the central bank have estimated inflows of $24.3 billion in the shape of fresh borrowing and rollover of existing loans.
Pakistan is dependent on foreign loan disbursements and rollovers. The country finds it difficult to pay back $12.7 billion worth of cash deposits maturing this year and $3.8 billion of Chinese commercial loans. The cumulative maturity of $16.5 billion is higher by $5.5 billion compared to the foreign exchange reserves of Pakistan.
Pakistan is hopeful that its international creditors will roll over $12.7 billion of cash deposits in the current fiscal year as the government is unable to pay back the debt due to the thin foreign exchange reserves of $11.1 billion. The reserves include the cash deposits, which indicate that the net reserves are negative.
The disbursements and rollovers during July-January FY25 were equal to 43% of the annual estimate.
There have also been issues of segregation of debt information among the Ministry of Finance, the Ministry of Economic Affairs and the State Bank of Pakistan. The World Bank, the Asian Development Bank and the United Nations Conference on Trade and Development have raised the issue of debt information disconnect among Pakistani organisations.
Details showed that Pakistan received $306.5 million for the construction of Chashma Nuclear Power Plant, known as C5. It is for the first time that the Ministry of Economic Affairs reported the figure in its debt bulletin for the current fiscal year.
Pakistan Atomic Energy Commission will take a total Chinese loan of $3 billion for the construction of the plant, which the federal government has guaranteed.
The debt bulletin also confirmed The Express Tribune’s story, which said that Pakistan took a $300 million commercial loan from the Gulf through United Bank Limited. The loan has been taken for nine months at a return ranging from 7.2% to 7.7%.
Saudi Arabia has finally approved a $1.2 billion oil facility at 6% interest and its per-month disbursement of $100 million will begin in March.
Multilateral creditors released $2.3 billion from July to January, which constituted more than half of the annual estimate. The Asian Development Bank gave over $1 billion – nearly two-thirds of the annual estimate.
The World Bank provided $754 million against the annual estimate of $2 billion, which accounted for 38% of the target. The World Bank has approved a $20 billion financing package for a period of 10 years.
The Ministry of Economic Affairs reported that the Islamic Development Bank released $400 million, including $265 million for an oil facility. The annual estimate is $740 million.
Pakistan has budgeted to raise $1 billion by issuing sovereign bonds but so far no progress has been made. The finance minister had earlier announced that Panda bonds would be issued by December but the deadline was missed again. Now, the finance ministry hopes to conclude the transaction by June this year.
One of the reasons is the poor credit rating. A delegation of Fitch – one of the three major credit rating agencies – is currently visiting Pakistan. It met Finance Minister Muhammad Aurangzeb on Tuesday and discussed the macroeconomic situation.
The Ministry of Economic Affairs stated that the country received $1.1 billion on account of investment in Naya Pakistan Certificates, which was far higher than the annual estimate.
Against the budgeted commercial loans of $3.8 billion, the government received $500 million in seven months and that too because of rollover by China in September and UBL lending of $300 million. China extended the loan at an interest rate of 8.5%, according to a finance ministry statement given to the Senate Standing Committee on Finance.
Loan disbursements by bilateral creditors amounted to only $246 million in seven months. China gave $97 million, followed by $102 million from France.
The United States disbursed $40 million in grants during the seven-month period. President Trump has suspended US grants for all countries under the US Agency for International Development. However, due to the insignificant amount, it will not have any major impact on Pakistan.
