Pakistan borrowed about $5.115 billion in foreign assistance during the first five months (July-November) of the fiscal 2022-2023, almost 14% more loan compared with same period last year, according to the Ministry of Economic Affairs’ (MEA) monthly report on Foreign Economic Assistance (FEA).
Pakistan had borrowed $4.5 billion in the same period last year, according to the report.
Pakistan received $842 million in foreign financing only in the month of November, a 6% increase compared with $794 million in November 2021. The total amount secured during the first five months of the fiscal year amounted to just 22.4% of the annual billion budget estimates of $22.8 billion. The $4.5 billion inflows during the same period of prior fiscal year accounted for 37% of the budget estimates of $12.2 billion for the entire year.
The external inflow stood at $3.1 billion during the five-month period of FY2019-20, accounting for around 24% of the annual budgeted amount of $13 billion.
The foreign assistance received between November and July also includes expensive foreign debt in Naya Pakistan Certificates from overseas Pakistanis and stood at just $139 million in five months against target of $1.6 billion during full year.
Foreign inflow sources
Unlike previous years, there were only three major sources of foreign inflows this year, including:
- $4.2 billion from multilateral lenders – $1.7 billion from ADB and $1.2 billion from the IMF
- $602 million from bilateral lenders, and
- $200 million approximately from commercial banks
The government had targeted about $2 billion from the fourth source – international bonds – but could not raise any funds due to poor credit rating amid external account challenges and resultantly historically low foreign exchange reserves.
The World Bank Group disbursed about $624 million in 5MFY23 compared to its $694m during the same period last year. Among the bilateral lenders, Saudi Arabia offered about $500 million in deferred oil payment facility in five months against a negligible share of just $1 million in the comparable period of 2021. This was followed by China with $55 million, up from $22 million last year.
The loans from commercial banks were down to just $200 million this year compared to a $1.53 billion in the first five months of FY22.
This sheds light on an unfortunate slide towards the debt trap as the governments had to rely on short-term expensive commercial loans amid the inability of the authorities concerned to ensure sufficient non-debt-creating inflows through higher foreign direct investments, remittances, and exports.