Pakistan services $1.353bn foreign loans in July-Sept

ISLAMABAD: Pakistan has paid back $1.353 billion on account of debt servicing of foreign loans during the first quarter (July-Sept) of the current fiscal year 2021-22, official data showed on Monday.

According to a report prepared by the Ministry of Economic Affairs (EAD), Islamabad paid back $1.036 billion as principal, while $317 million was paid as interest on foreign loans. The government paid back $427 million to commercial banks, $292 million to the World Bank, $273 million to Asian Development Bank (ADB), $259 million to the International Monetary Fund, $32 million to bonds investors, $14 million to China, $4 million to Kuwait and $53 million to others.

The bulk of repayments were made to foreign commercial banks, having 32 percent share in the total repayments, followed by World Bank (22 percent share), ADB (20 percent share), and China (14 percent share in the total). Total disbursement of foreign loans and grants stood at $3.216 billion during the first quarter of the current fiscal year. Out of this, Islamabad obtained $1.597 billion or 50 percent of total disbursements from multilateral development partners, mainly ADB, World Bank, and IsDB; $468 million or 15 percent from foreign commercial banks, $1 billion or 31 percent from international bond holders and $109 million or 3 percent from bilateral development partners particularly China, USA and the UK.

Amongst multilateral development partners, World Bank and ADB were the largest development partners with disbursements of $529 million and $461 million (16 percent and 14 percent of total disbursement), respectively followed by IsDB and AIIB. Similarly, China was the largest among bilateral partners, disbursing $73 million or 67 percent of the total $109 million shared by bilateral development partners.

The Foreign Economic Assistance (EFA) is mainly received in the shape of programme financing, budgetary support, project financing and commodity financing. During the first quarter, 19 percent of the total disbursements were programme financing, which have been arranged to broaden and deepen the financial systems, improve fiscal management and regulatory framework to foster growth and competitiveness in Pakistan.

An amount of $468 million or 22 percent of the total was obtained from foreign commercial banks and $796 million or 38 percent as project financing. The remaining 21 percent of the disbursements were for commodity financing purposes. The sectoral composition of project assistance shows that during Q1 FY 2021-22, the largest share of disbursements ie 37 percent was received for Covid-19 financing needs. On the other hand, the largest sector in terms of disbursements was energy and power, having 24 percent share in the total project assistance of $853 million. It was followed by transport and communication (11 percent share), and physical planning and housing (6 percent share in the total project assistance).

The composition of external public debt shows that as of September 30, 2021, Pakistan’s total external public debt stood at $86.8 billion. It does not include total eternal sector liabilities. According to the State Bank of Pakistan, the total external debt and liabilities stood at $127 billion till September 30, 2021,

The composition of external public debt demonstrates that it was derived from three key sources, namely, multilateral external debt comprising 41 percent share in the total external public debt (inclusive of IMF funding), followed by bilateral external debt (24 percent share in total), and foreign commercial banks (11 percent share in the total). The remaining 16 percent of the external public debt consists of State 12 Administration of Foreign Exchange (SAFE), China’s deposit and Eurobonds (inclusive of Sukuk).

The EAD report states that net transfer was also a critical variable to analyse the overall external public debt stock. Net transfers indicate any increase or decrease in the external public debt stock and was calculated as the difference between the external public loans received and their repayments made to the foreign creditors during a specific period. A positive balance reflects an increase in external debt stock while negative balance depicts a decrease in external debt stock.

Total net transfers to the government’s external public debt were $2.065 billion, whereas it was $1.408 billion during the corresponding period last year. The share of concessional external loans with longer maturity increased by $1.145 billion (multilateral and bilateral loans) and the share of commercial borrowing has increased by $1.143 billion, this includes net borrowing of $143 million from commercial banks and $1 billion from Eurobonds.