Pakistan's foreign loans soar to USD 10.4 billion in July-December

Pakistan has borrowed USD 10.4 billion in the past six months, which was higher by 78 per cent over the same period of last year, as it struggled to address the growing current account imbalance and keep the debt-financed foreign exchange reserves at current levels, local media reported. 

Gross foreign loan disbursements during July-December of the current fiscal year remained at USD 9.3 billion, The Express Tribune reported citing the Ministry of Economic Affairs as saying on Wednesday. In addition to this, Pakistan received USD 1.1 billion in foreign loans from the overseas Pakistanis through the Naya Pakistan Certificates, according to the central bank data. 

The cumulative gross foreign loans secured in the first half of the current fiscal year were higher by USD 4.5 billion, or 78 per cent, from the same period of the previous fiscal year, showed the official statistics, The Express Tribune reported. It further reported that the country is sliding deeper into the debt trap and has reached a point where it is now contracting the most expensive foreign loans in its 75-year history. 

Successive governments, including the current one, have failed to ensure sufficient inflows through the non-debt creating sources, ie exports and foreign direct investment. However, the remittances - another non-debt creating source - have shown a significant improvement over the past two years. 

Information Minister Fawad Chaudhry said last month that the government was taking new loans to pay off the old debt. 

According to the Pakistan based newspaper, the Debt Policy Statement 2021-22 showed that contrary to the claims of the government that the debt burden was increasing due to the repayment of old loans, the external debt repayments, in fact, decreased USD 2.1 billion, or 23.3 per cent, in the last fiscal year compared to the preceding year. 

The highly expensive Naya Pakistan Certificates-backed loans are a new debt instrument that the Pakistan Tehreek-e-Insaf (PTI) government has added to the list. 

The USD 1.1 billion loan from July through December of current fiscal year was acquired at 7 per cent interest rate in dollar terms. The foreign loans of USD 9.3 billion, reported by the Ministry of Economic Affairs, are inclusive of the USD 3 billion short-term loan received from Saudi Arabia last month, The Express Tribune reported.