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Foreign loans soar to $10.4b in Jul-Dec

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Foreign loans soar to $10.4b in Jul-Dec​

Govt borrowing rises 78% to finance budget deficit, build forex reserves

Shahbaz Rana January 27, 2022

loan photo reuters

Loan. PHOTO: REUTERS


ISLAMABAD:
The government borrowed $10.4 billion in the past six months, which was higher by 78% over the same period of last year, as it struggled to address the growing current account imbalance and keep the debt-financed foreign exchange reserves at current levels.
Gross foreign loan disbursements during July-December of current fiscal year remained at $9.3 billion, the Ministry of Economic Affairs reported on Wednesday.
In addition to this, the government received $1.1 billion in foreign loans from the overseas Pakistanis through the Naya Pakistan Certificates, the central bank data showed. The cumulative gross foreign loans secured in the first half of current fiscal year were higher by $4.5 billion, or 78%, from the same period of previous fiscal year, showed the official statistics.
The country is sliding deeper into the debt trap and has reached a point where it is now contracting the most expensive foreign loans in its 75-year history. Successive governments, including the current one, have failed to ensure sufficient inflows through the non-debt creating sources, ie exports and foreign direct investment. However, the remittances – another non-debt creating source – have shown a significant improvement over the past two years.
Information Minister Fawad Chaudhry said last month that the government was taking new loans to pay off the old debt.
The Debt Policy Statement 2021-22 showed that contrary to the claims of the government that the debt burden was increasing due to the repayment of old loans, the external debt repayments, in fact, decreased $2.1 billion, or 23.3%, in the last fiscal year compared to the preceding year.
The highly expensive Naya Pakistan Certificates-backed loans are a new debt instrument that the Pakistan Tehreek-e-Insaf (PTI) government has added to the list. The $1.1 billion loan from July through December of current fiscal year was acquired at 7% interest rate in dollar terms. The foreign loans of $9.3 billion, reported by the Ministry of Economic Affairs, are inclusive of the $3 billion short-term loan received from Saudi Arabia last month.
Read Govt in violation of debt reduction law, cabinet told
However, despite the Saudi Arabian assistance, the gross official foreign exchange reserves dipped to $17.1 billion by mid-January – sufficient to finance hardly 10 weeks of imports.
An amount of $2 billion was received in foreign commercial loans from banks in the first six months of current fiscal year, including $502 million in December.

The government borrowed $1.1 billion from Dubai Bank, including a fresh contract for $420 million.
Another loan of $487 million was taken from Standard Chartered Bank, London, according to the economic affairs ministry. A financing of $343 million was secured from Credit Suisse AG.
Overall, 84% of the loans, or $8.7 billion, were taken for non-productive purposes like budget financing, crude oil import and foreign exchange reserves’ building.
Owing to the increasing reliance on loans to enhance the country’s foreign currency reserves and finance the budget deficit, the cost of debt servicing has gone up significantly.
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The government’s reliance on highly expensive and short-term foreign debt further increased due to its decision to increase the dependency on foreign commercial banks and Naya Pakistan Certificates. As a result, the average maturity time of external debt deteriorated from last year’s level of seven years to six years and eight months by the end of June 2021. The share of foreign commercial loans has already increased from 11% to 13% in the external public debt. Official statistics showed that bilateral lending to Pakistan almost dried up in the current fiscal year, standing at a mere $94 million so far for project financing. This included $73.4 million in project lending by China. The government has not yet been able to secure a fresh commitment of $6 billion from China for financing the Main Line-I railway project of China-Pakistan Economic Corridor (CPEC).
Read more Pakistan raised $1b through Sukuk bond
Pakistan also obtained loans worth $2.8 billion from multilateral creditors. The Asian Infrastructure Investment Bank released $36 million for project financing.
Amongst other multilateral development partners, the Asian Development Bank (ADB) disbursed $1.1 billion during the July-December period, including $488 million for vaccine procurement.
The World Bank released $932 million in the six months under review while the Islamic Development Bank disbursed $805 million for crude oil imports. The Ministry of Economic Affairs also booked $291 million worth of publicly guaranteed debt, which China disbursed for Karachi’s nuclear power plants, known as K2 and K3.
The government also took $10 million in loan from NBP Bahrain to finance the losses of Roosevelt Hotel, New York, which was owned by the loss-making Pakistan International Airlines.
Published in The Express Tribune, January 27th, 2022.
 

fisher1

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It's okay.

In the religion of PTI, these loans are a great things and will make our lives better. Loans are only bad when someone other than PTI takes them.

If you still feel bad, just chant Nawaz Sharif bad, Musharaf bad, Jinnah bad, only IK good farishta and its OK.
 

Riz

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I don't mind as long as it helps our export, remittance and reserve to increase.
Kin mirasion ko samjha rahy ho :lol:

It's okay.

In the religion of PTI, these loans are a great things and will make our lives better. Loans are only bad when someone other than PTI takes them.
PTI is taking loan to return the previous loan taken by the ghunda league..now tell us why the ghunda league taken 45 billions dollar loan in there last 5 years ?? Socho bhai dimag use karo

Well good to see that Riyasat-i-Madina is going full speed ahead with SOOD and Haram Khoori ! Wow, what a Riyasat !!! :lol: :lol: :lol: :lol: :lol: :lol:
Khani beekh aor batain daikho inki :lol:
 

Wood

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i dont mind as long as i have 3 credit cards in my wallet whose bill i cant pay
I think what the poster means to say is that as long as the debt results in a rise of revenue that can cover debt servicing, this can be tolerated. Or in other words, the debt carrying capacity is better because of the growth in your economy.
 

AZ1

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Kin mirasion ko samjha rahy ho :lol:


PTI is taking loan to return the previous loan taken by the ghunda league..now tell us why the ghunda league taken 45 billions dollar loan in there last 5 years ?? Socho bhai dimag use karo


Khani beekh aor batain daikho inki :lol:
marasio ka tou pata nahi but
"parhay likhay Jahil"
 

blueazure

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I will cut down my expenses to meet my bill requirement rather than looking towards govt to give charity to me. Its beyond your understanding.

It's okay.

In the religion of PTI, these loans are a great things and will make our lives better. Loans are only bad when someone other than PTI takes them.

If you still feel bad, just chant Nawaz Sharif bad, Musharaf bad, Jinnah bad, only IK good farishta and its OK.


IK loans are halal

how dare u !
 

RealNapster

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I don't get one thing. We are offering bonds with interest rate of 6-8% by-annual. Similarly we are taking loans on an interest rate of 4-5% . Instead why not take $100 billion loan from China for 20 years and 5 years grace period ? I am sure they will offer 3% interest rate as I think that is what they keep charging from us for different loans. Correct me if I am wrong. So why not pay everyone else and instead you pay to one country each year after that ? Like $5-7 billion ? I am sure it's way less then the current 15-20 billion $ we keep paying each year out of which majority goes to debt servicing and only $2-3 billion in principle. But for that we have already taken $20 billion more loans so our loans never decrease and keep increasing at a rate of $10 billion each year. We need to sign this strategic deal with China ASAP otherwise we will keep our country at its toes and won't be able to succeed.
 

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