Pakistani authorities have successfully secured approximately $6.3 billion in foreign loans during the first seven months of the current fiscal year. This amount constitutes nearly 35.75 per cent of the annual budget estimate, achieved despite limited borrowing avenues due to poor credit rating and adverse conditions in the global financial markets, even with the support of the International Monetary Fund (IMF).
The caretaker government now claims improved debt management, highlighting its avoidance of resorting to international capital markets and commercial loans as outlined in the 2023-24 federal budget.
In its monthly report on Foreign Economic Assistance (FEA), the Economic Affairs Division (EAD) revealed that the country received $6.3 billion in foreign inflows from July to January in FY24, compared to the annual target of $17.6 billion. This total indicates a slight increase of $170 million from the $6.134 billion received during the same period last year, which was notably challenging given Pakistan’s tumultuous relationship with the IMF.
The subdued inflows primarily stem from the adverse international environment and Pakistan’s low credit rating, deterring participation in international capital markets. Consequently, Pakistan postponed plans to launch a $1.5 billion Eurobond due to elevated interest rates in these markets and the nation’s diminished credit rating.
According to the EAD report, the government also budgeted an additional $4.5 billion in foreign commercial loans for the current fiscal year, yet these plans did not materialize due to a decline in the current account deficit.
In January, total inflows recorded by the EAD amounted to $331 million, compared to $1.62 billion in December—a notable decrease. This figure was slightly lower than the $416 million received in November. December 2023 saw substantial disbursements from major multilateral lenders, including $638 million from the World Bank, $469 million from the Asian Development Bank, and $255 million from the Asian Infrastructure Investment Bank (AIIB).
Inflows of Major Foreign Economic Assistance (FEA) during the first seven months included $2.89 billion in July 2023, following Pakistan’s agreement with the IMF for a new short-term program.
These figures are in addition to the $1.9 billion released by the IMF between July and January as part of the $3 billion Stand-By Arrangement (SBA), and a separate $1 billion from the United Arab Emirates, which are accounted for by the State Bank of Pakistan (SBP). Consequently, total foreign inflows, including IMF and UAE contributions, reached $9.2 billion in seven months.
Interestingly, the EAD accounted for $1.16 billion received from the IMF in the previous fiscal year, but did not reflect similar inflows this year. Last year, the EAD projected $3 billion from the IMF but only $1.16 billion materialized following the derailment of the program after the exit of former finance minister Miftah Ismail.
For FY24, the EAD had budgeted $2.4 billion from the IMF, which later committed $3 billion with the signing of a fresh program set to conclude in April. The fund has already disbursed approximately $1.9 billion, leaving $1.1 billion pending subject to the successful completion of the quarterly review.
Moving forward, the Ministry of Finance anticipates $3.5 billion in commercial loans based on the IMF agreement, down from the $4.5 billion initially budgeted.
Out of the $6.3 billion received, the majority—$4.5 billion—was designated for budgetary support or program loans, with approximately $1.8 billion allocated for project aid, according to the EAD.
