Islamabad:
Pakistan obtained a record of $ 26.7 billion in foreign loans during the last fiscal year, almost half in the form of previously obtained loans, indicating the deep dependence of the country of multilateral and bilateral creditors.
The $ 26.7 billion disbursed during fiscal year 2024-25 were slightly higher than the previous fiscal year, according to data compiled by the Ministry of Economic Affairs, the State Bank of Pakistan (SBP) and the Ministry of Finance.
Of the $ 26.7 billion in foreign loans, only $ 3.4 billion were received on Tuesday or almost 13% for project financing, revealed the official details published by the Ministry of Economic Affairs.
These low receipts for project financing underline the difficulties in paying loans, since most foreign loans are used for budget support and to build foreign exchange reserves, none of which generates income for reimbursement.
The gross currency reserves of the Central Bank of $ 14.5 billion at the end of June are largely the result of the reinvestments, the refinancing of existing loans and some new loans. This highlights the growing dependence of Pakistan in foreign creditors, which makes economic stability more and more vulnerable.
According to the details, the Ministry of Economic Affairs reserved $ 11.9 billion in federal government accounts, approximately $ 1.2 billion higher than the previous fiscal year. The International Monetary Fund (IMF) disbursed $ 2.1 billion, while another $ 12.7 billion were restarted as the cash deposits of Saudi Arabia, China, the United Arab Emirates and Kuwait.
Saudi Arabia has placed $ 5 billion in cash deposits with the Central Bank of Pakistan, charging an interest of 4% in loans. The amount is transmitted annually, since Islamabad is still unable to pay. Interestingly, the IMF’s three -year program is based on the continuous re -enrollment of these loans of $ 12.7 billion, throwing doubts about the depth of the stability of the external sector.
China has placed $ 4 billion in cash deposits, charging more than 6% in interest. The EAU have deposited $ 3 billion with the Central Bank.
China also disbursed $ 484 million in guaranteed loans in the last fiscal year, mainly used for the purchase of assets.
Pakistan failed to take advantage of international capital markets last fiscal year and their planned loans of $ 1 billion through Eurobonds and Panda bonds did not materialize. On the other hand, the Government and the Central Bank obtained an expensive foreign commercial loan, backed by multilateral guarantees, to close the gap.
With Pakistan’s credit rating in the state of garbage, the country remains locked in the world capital markets and must pay high interest rates for commercial loans and cash deposits.
The Ministry of Finance managed to ensure $ 4.3 billion in commercial loans, mostly refinanced Chinese loans and others backed by guarantees of the Asian Development Bank (ADB).
The ADB disbursed $ 2.1 billion in new loans, $ 500 million more than budgeted. Multilateral institutions contributed $ 6.9 billion in general, including $ 2.1 billion of the IMF.
The World Bank launched $ 1.7 billion, $ 300 million below the budgeted amount, and has not announced any new budget support loan for the current fiscal year.
The Islamic Development Bank disbursed $ 716 million, and Saudi Arabia awarded $ 200 million under an insured oil financing center with an interest of 6%, which makes it an expensive loan.
Pakistan’s debt / GDP ratio and the gross financing relationship to GDP currently exceed sustainable levels, according to the Ministry of Finance. A need for gross financing greater than 15% of GDP is considered unsustainable. The previous projections of the Ministry of Finance suggest that Pakistan will remain above that threshold for at least the next three years.
In its first review of the $ 7 billion program, the IMF marked several risks for the implementation of consistent policies, including resistance to reforms, the low fiscal income, high needs for gross financing, low gross reserves and a position derived from considerable net currency of the PAB. He also warned that socio -political tensions could erode the refund and sustainability of debt.
For three fiscal years, FY2025-26 to FY2027-28, the IMF has projected the gross external financing requirements of Pakistan at $ 70.5 billion. These figures may vary according to changes in the current account deficit, remittance flows and exports.
The IMF also declared that the general risk of sovereign stress remains high, reflecting a high level of vulnerability to high debt levels, large gross financing needs and low reserve shock absorbers. However, the Government has assured the IMF that it is closely monitoring the vulnerabilities of the debt derived from the high gross financing requirements and a significant sovereign bank link.
