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Pakistan eyes borrowing of $12.3 billion in FY20
By Shahbaz Rana
Published: June 2, 2019
TWEET EMAIL
A Reuters file photo.
ISLAMABAD: Pakistan is eyeing obtaining record foreign loans of over $12 billion in the upcoming fiscal year on the strength of an International Monetary Fund (IMF) programme, but it will still face a financing gap due to the requirement of building foreign currency reserves and $10.7 billion in debt repayments.
The Ministry of Finance has estimated the receipt of $12.3 billion from bilateral and multilateral lenders, commercial banks, issuance of Eurobonds and the IMF in fiscal year 2019-20, according to sources in the ministry.
The estimated fresh borrowing will be nearly one-fifth or $1.9 billion higher than the outgoing fiscal year’s revised estimate of $10.3 billion worth of external inflows. Pakistan has not planned to take fresh SAFE deposits from China in the new fiscal year as against $2 billion obtained in the outgoing year.
However, the country’s gross external financing requirement has been estimated at a minimum $19 billion, excluding the additional needs to shore up the foreign currency reserves to a level that are sufficient to finance three months of imports, said the sources.
The government has estimated a record $10.7 billion in debt repayments in fiscal year 2019-20 while another $8.3 billion will be needed to finance the current account deficit, they added. The current account deficit has been projected at 3% of gross domestic product (GDP). Some of the needs will be met through nearly $2.5 billion in foreign direct investment, privatisation proceeds of $2 billion and private-sector borrowings.
But the real challenge will be how to increase the central bank’s foreign currency reserves to close to $13 billion from the anticipated level of around $7 billion by the end of this month. The reserves currently stand at $8 billion, which are not sufficient to provide cushion for even two months of imports.
After including the central bank’s buffer requirement, there will still be a financing gap of $6 billion to $7 billion in the next fiscal year, according to the sources.
Pakistan and the IMF have announced a staff-level agreement for a $6-billion 39-month loan package, which will be supported by budgetary assistance from the World Bank and the Asian Development Bank. But all these inflows will be insufficient to provide comfort to the Q-block dwellers.
Out of the $6 billion, Pakistan will receive $2 billion from the IMF in the next fiscal year, subject to successful completion of quarterly reviews. Against $2 billion inflows, the government will return the IMF $750 million on account of repayment of previous loans, said the sources.
Similarly, the government still has a plan to borrow $2 billion from foreign commercial banks. But the new borrowings will not be sufficient to repay the $4.4-billion maturing commercial bank loans, the finance ministry sources said. Most of the $4.4-billion commercial loans will be returned to Chinese financial institutions, mainly Industrial and Commercial Bank of China and China Development Bank. Pakistan also plans to float $3 billion worth of Eurobonds in the next fiscal year as against $1.6 billion in repayments on account of Eurobonds, they added.
Bilateral outflows will be higher than inflows in the next fiscal year. As against total bilateral inflows of $1 billion, the outflows will stand at $1.8 billion, according to the ministry officials.
Pakistan will return $654 million to China against the fresh inflow of $553 million. Similarly, the repayment to Saudi Arabia will amount to $161 million against new loans of $51 million, the sources said.
Pakistan will repay $390 million worth of Japanese debt as against projected fresh borrowing of $35 million. Inflows from multilateral creditors would exceed outflows. Pakistan has estimated the receipt of $4.2 billion from these creditors against $2.2 billion in repayments. The ADB is expected to lend $1.6 billion while it will be repaid $1 billion in maturing debt. The World Bank may extend $1.3 billion in new loans against $800 million worth of maturing debt.
The lending from the ADB and the World Bank would pick up due to the restoration of budgetary support.
The Islamic Development Bank is expected to extend $1.1 billion in fresh loans. Pakistan will return $244 million to the IDB in the next fiscal year. Meanwhile, the World Bank board of directors on Friday approved $465 million in loans for two projects to support higher education and expand sustainable electricity trade between Central Asia and South Asia, according to the local office of the World Bank.
Both projects form part of the priority areas identified in “Pakistan@100: Shaping the Future”, a flagship initiative that identifies frontier interventions for Pakistan to become an upper middle-income country by 2047, said World Bank Country Director for Pakistan Illango Patchamuthu.
The $400-million Higher Education Development in Pakistan project will strengthen tertiary education to produce skilled, innovative and enterprising graduates. It will strengthen partnerships with the industry for strategic research and develop data-driven governance of tertiary education.
The Central Asia-South Asia Electricity Transmission and Trade project (CASA-1000) will enable sustainable electricity trade between Afghanistan, Kyrgyz Republic, Pakistan and Tajikistan. The project will use $65 million in additional financing to complete Pakistan’s infrastructure part of the CASA-1000 project. It will help meet the growing energy demand in Afghanistan and Pakistan, by transferring surplus summer hydroelectric power from the Kyrgyz Republic and Tajikistan.
Published in The Express Tribune, June 2nd, 2019.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
Read more: borrowing , budget 2019-20 , debt
By Shahbaz Rana
Published: June 2, 2019
TWEET EMAIL
A Reuters file photo.
ISLAMABAD: Pakistan is eyeing obtaining record foreign loans of over $12 billion in the upcoming fiscal year on the strength of an International Monetary Fund (IMF) programme, but it will still face a financing gap due to the requirement of building foreign currency reserves and $10.7 billion in debt repayments.
The Ministry of Finance has estimated the receipt of $12.3 billion from bilateral and multilateral lenders, commercial banks, issuance of Eurobonds and the IMF in fiscal year 2019-20, according to sources in the ministry.
The estimated fresh borrowing will be nearly one-fifth or $1.9 billion higher than the outgoing fiscal year’s revised estimate of $10.3 billion worth of external inflows. Pakistan has not planned to take fresh SAFE deposits from China in the new fiscal year as against $2 billion obtained in the outgoing year.
However, the country’s gross external financing requirement has been estimated at a minimum $19 billion, excluding the additional needs to shore up the foreign currency reserves to a level that are sufficient to finance three months of imports, said the sources.
The government has estimated a record $10.7 billion in debt repayments in fiscal year 2019-20 while another $8.3 billion will be needed to finance the current account deficit, they added. The current account deficit has been projected at 3% of gross domestic product (GDP). Some of the needs will be met through nearly $2.5 billion in foreign direct investment, privatisation proceeds of $2 billion and private-sector borrowings.
But the real challenge will be how to increase the central bank’s foreign currency reserves to close to $13 billion from the anticipated level of around $7 billion by the end of this month. The reserves currently stand at $8 billion, which are not sufficient to provide cushion for even two months of imports.
After including the central bank’s buffer requirement, there will still be a financing gap of $6 billion to $7 billion in the next fiscal year, according to the sources.
Pakistan and the IMF have announced a staff-level agreement for a $6-billion 39-month loan package, which will be supported by budgetary assistance from the World Bank and the Asian Development Bank. But all these inflows will be insufficient to provide comfort to the Q-block dwellers.
Out of the $6 billion, Pakistan will receive $2 billion from the IMF in the next fiscal year, subject to successful completion of quarterly reviews. Against $2 billion inflows, the government will return the IMF $750 million on account of repayment of previous loans, said the sources.
Similarly, the government still has a plan to borrow $2 billion from foreign commercial banks. But the new borrowings will not be sufficient to repay the $4.4-billion maturing commercial bank loans, the finance ministry sources said. Most of the $4.4-billion commercial loans will be returned to Chinese financial institutions, mainly Industrial and Commercial Bank of China and China Development Bank. Pakistan also plans to float $3 billion worth of Eurobonds in the next fiscal year as against $1.6 billion in repayments on account of Eurobonds, they added.
Bilateral outflows will be higher than inflows in the next fiscal year. As against total bilateral inflows of $1 billion, the outflows will stand at $1.8 billion, according to the ministry officials.
Pakistan will return $654 million to China against the fresh inflow of $553 million. Similarly, the repayment to Saudi Arabia will amount to $161 million against new loans of $51 million, the sources said.
Pakistan will repay $390 million worth of Japanese debt as against projected fresh borrowing of $35 million. Inflows from multilateral creditors would exceed outflows. Pakistan has estimated the receipt of $4.2 billion from these creditors against $2.2 billion in repayments. The ADB is expected to lend $1.6 billion while it will be repaid $1 billion in maturing debt. The World Bank may extend $1.3 billion in new loans against $800 million worth of maturing debt.
The lending from the ADB and the World Bank would pick up due to the restoration of budgetary support.
The Islamic Development Bank is expected to extend $1.1 billion in fresh loans. Pakistan will return $244 million to the IDB in the next fiscal year. Meanwhile, the World Bank board of directors on Friday approved $465 million in loans for two projects to support higher education and expand sustainable electricity trade between Central Asia and South Asia, according to the local office of the World Bank.
Both projects form part of the priority areas identified in “Pakistan@100: Shaping the Future”, a flagship initiative that identifies frontier interventions for Pakistan to become an upper middle-income country by 2047, said World Bank Country Director for Pakistan Illango Patchamuthu.
The $400-million Higher Education Development in Pakistan project will strengthen tertiary education to produce skilled, innovative and enterprising graduates. It will strengthen partnerships with the industry for strategic research and develop data-driven governance of tertiary education.
The Central Asia-South Asia Electricity Transmission and Trade project (CASA-1000) will enable sustainable electricity trade between Afghanistan, Kyrgyz Republic, Pakistan and Tajikistan. The project will use $65 million in additional financing to complete Pakistan’s infrastructure part of the CASA-1000 project. It will help meet the growing energy demand in Afghanistan and Pakistan, by transferring surplus summer hydroelectric power from the Kyrgyz Republic and Tajikistan.
Published in The Express Tribune, June 2nd, 2019.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
Read more: borrowing , budget 2019-20 , debt
