Foreign loan disbursements dropped 43% to $3.6 billion in the first five months of the current fiscal year due to slower-than-expected releases, showed the official statistics on Monday.
Against loans of $6.4 billion received during the July-November period of last fiscal year, Pakistan got $3.6 billion from bilateral and multilateral creditors during this fiscal year, according to figures reported by the Ministry of Economic Affairs and the State Bank of Pakistan.
The ministry reported that during the first five months of 2024-25, the bilateral and multilateral lenders disbursed less than $2.6 billion, excluding the IMF’s first loan tranche.
After adding the IMF installment, the disbursement reached $3.6 billion, which was $2.8 billion less than the comparative period of last year.
In the last fiscal year, Saudi Arabia gave $2 billion in additional cash deposit while the United Arab Emirates (UAE) disbursed $1 billion worth of new loan.
For the current fiscal year, the federal government and the central bank have estimated inflows of $24 billion in the shape of fresh borrowing and rollovers of existing loans. The rollover of $5 billion worth of Saudi cash deposits and $4 billion worth of Chinese cash deposits is also part of the government’s plan.
Pakistan is dependent on foreign loan disbursements and rollovers. The country finds it difficult to pay back $12.7 billion of cash deposits maturing this year and $3.8 billion of Chinese commercial loans. The cumulative maturities of $16.5 billion are higher by $4.5 billion compared to the gross official foreign exchange reserves of Pakistan.
The IMF programme had been expected to unblock other financing lines but due to the low credit rating of Pakistan, coupled with slow movement of different projects, the country is struggling to meet its external financing needs.
The disbursements during the July-November FY25 period were equal to 15% of the annual estimate. One of the reasons for the low disbursements was that the majority of rollovers fall in the December-June period.
Saudi Arabia this month extended the repayment of $3 billion debt for one year, which the Ministry of Economic Affairs will officially report next month. The government and the central bank separately report the loan release data of the IMF and other bilateral and multilateral creditors.
The World Bank, which in the past was a major source of loans, has said that it will not extend any new budget support loan to Pakistan in this fiscal year. Saudi Arabia has not yet approved a $1.2 billion oil facility while project funding is also moving at a snail’s pace.
Out of the borrowing of $24 billion, the government has included $19.2 billion in budget documents. It has not made the rollover of $3 billion by the UAE and IMF repayments part of federal books as these are meant for balance of payments support.
Data from the Ministry of Economic Affairs showed that multilateral creditors released $1.4 billion from July to November, which constituted 32% of the annual estimate. The disbursements were 88% higher than the last fiscal year due to a $500 million loan released by the Asian Development Bank for the Climate and Disaster Resilience Enhancement Programme.
The ADB gave a total of $764 million in five months for multiple schemes compared to the annual estimate of $1.7 billion. The ADB’s disbursement was nearly half more than the previous fiscal year. The World Bank provided $398 million against the annual estimate of $2 billion, 16% less than the last fiscal year. The World Bank has earlier dropped the $500 million worth of Programme for Affordable and Clean Energy (PACE-II) after Pakistan could not meet prior conditions. The Ministry of Economic Affairs reported that the Islamic Development Bank released $210 million, including $119 million for an oil facility, in five months. The annual estimate is $740 million.
Pakistan also budgeted to raise $1 billion by issuing sovereign bonds but so far no progress has been made. The finance minister has announced that Panda bonds will be issued by December.
The Ministry of Economic Affairs’ report stated that the country received $735 million on account of investment in Naya Pakistan Certificates, which was higher than the annual estimate.
Against the budgeted $3.8 billion worth of commercial loans, the government received $200 million in five months and that too because of a rollover by China in September. China extended the loan at an interest rate of 8.5%, according to the finance ministry’s statement to the Senate Standing Committee on Finance.
The loan disbursements by bilateral creditors amounted to only $202 million in five months, down 63% compared to last year. China gave $97 million, followed by $90 million from France.