Pakistan’s net external debt nears $5B

Pakistan's Ministry of Economic Affairs (MEA) has said the country made a net addition of $4.77 billion in the first half of the current fiscal year to its total external public debt of $90.6 billion.

In its quarterly report on Foreign Economic Assistance (FEA) for July-December 2021, the MEA said the total external loan inflows during the first half of the year amounted to $8.972 billion against loan outflows of $4.2 billion, thus making a net addition of $4.772 billion.

"As of Dec 31, 2021, Pakistan's total external public debt stood at $90.6 billion," said the quarterly report, reports the Dawn.

It said that during the first half of FY22, the Pakistan government signed new loan agreements worth $8.481 billion as commitments. These included $2.484 billion worth of agreements with foreign commercial banks, $1.956 billion with multilateral development partners, $3 billion as safe deposits, $1 billion committed as Eurobonds, and another $1 billion from the international capital markets through tap-issuance.

Among the multilateral development partners, the Islamic Development Bank (IsDB) topped the list with $834 million followed by the Asian Development Bank with $800m and the World Bank with 16% of multilateral partners.

From July to December of FY22, $7.545 billion were set aside for programme financing via foreign commercial banks and Eurobonds to broaden and deepen the financial system, improve fiscal management, and strengthen the regulatory framework in order to promote growth and competitiveness in Pakistan. A total of $894 million was set aside for project financing.

The report said the actual disbursements stood at $9.131 billion during the period and were mainly under the projects and programmes loans and grants from multilateral and bilateral development partners and financial institutions.

The disbursements included $2.907 billion or 32% from multilateral development partners, primarily ADB, World Bank, and IsDB, followed by $2.03 billion or 22% from foreign commercial banks, $1 billion or 11% from bonds, $3 billion or 33% in safe deposits from friendly countries, and $150 million or 2% from bilateral lenders such as China, the United States, and the United Kingdom.

The government paid an amount of $5.039 billion during July–December 2021 on account of debt servicing of external public loans. This consists of principal repayment of $4.2 billion and interest payments of $839m.

The FEA is mainly received in the form of programme financing, budgetary support, project financing, and commodity financing. 

During the review period, programme financing accounted for 57% of total disbursements, with the goal of broadening and deepening financial systems, improving fiscal management, and strengthening the regulatory framework in order to promote growth and competitiveness in Pakistan.