Pakistan Depends on Global Commercial Banks to Continue Dollar Inflows (Report)


A file photo of a man counting US dollar banknotes. Photo: AFP
  • Out of $ 802.3 million in foreign loans raised in November 2021, Islamabad received $ 663.2 million from international commercial banks.
  • Sources say Islamabad’s inability to complete 6th review under a $ 6 billion IMF program explains the reliance on easy dollar inflows.
  • Analysis of the data shows that the government is forced to opt for short-term commercial loans to meet its annual budget targets on external inflows.

Pakistan continues to rely heavily on international commercial banks to generate inflows of dollars in order to avoid depletion of foreign exchange reserves despite the persistent deadlock over the renewal of the IMF program, The news reported on Friday.

Of the $ 802.3 million in foreign loans raised in November 2021, Islamabad received $ 663.2 million from international commercial banks.

The publication quoted leading official sources: “It was Islamabad’s inability to complete the 6th review under the IMF’s $ 6 billion extended financing facility that continued to depend heavily on the country for entry of cheap dollars through commercial banks “.

Although it planned to raise $ 1 billion through the launch of the Sukuk bond, the government was unable to move forward after witnessing a weak appetite from the international market, the publication reported. .

It was then decided that the loan would be launched during the second semester (January-June) of the current financial year.

Against the total budget estimate of $ 14.008 billion for the entire 2021-2022 fiscal year, Islamabad has so far generated $ 4.699 billion in the first five months of the current fiscal year.

Pakistan was able to increase total inflows of dollars in loans and grants to $ 4.7 billion (exactly $ 4.699 billion) in the first five months (July-November) of the current fiscal year 2021-22 against 4.5 billion dollars generated. during the same period of the previous fiscal year.

An analysis of official data showed that the government was forced to resort to short-term commercial borrowing to close the gap and meet its fiscal targets on external inflows on an annual basis.

During the same period of the last fiscal year 2020-21, the government received $ 4.499 billion in total external inflows from several funding sources, which represented 37% of the annual budget estimate of $ 12.233 billion for the full year 2020-21.

In fiscal year 2019-2020, external inflows amounted to $ 3,108 billion, or approximately (24%) of the annual budgeted amount of $ 12,958 million. Total revenue of $ 4.499 billion represents $ 1.3 billion or 29% in program assistance / budget support to restructure the Pakistani economy; $ 1.621 billion (36%) in foreign commercial loans to repay maturing foreign commercial loans; and $ 518 million (12%) as project assistance to finance its development project activities for the improvement of the socio-economic development of the country and for the creation of assets and $ 60 million (1% ) as short-term credit while $ 1 billion (22%) received in terms of term deposits during the first five months of the last fiscal year 2020-2021.

In the first five months of the current fiscal year, the government generated $ 128.74 million from bilateral creditors, with China providing $ 73 million, France $ 3.5 million, Germany 3 , $ 52 million, Japan $ 5.15 million, Saudi Arabia $ 1.09 million, British $ 10.01 million, and the United States $ 29.23 million. .

The government had generated $ 1.04 billion through Eurobond in July 2021, so this amount also adds to the total inflows received in the first five months of the current fiscal year. Through international commercial banks, the government raised $ 1.529 billion in the first five months of the current fiscal year. The government secured $ 720 million from the Dubai Bank, $ 478.2 million from Standard Chartered Bank of London and $ 270 million from the Consortium of Sussie AG, UBL and ABL. The government obtained $ 1.998 billion in loans from multilateral creditors in the first five months of the current fiscal year, including $ 620 million from ADB, $ 37.77 million from AIIB, $ 115 million from WB IBRD, $ 739.15 from WB loans to IDA, $ 468.3 from short-term loans from IDB, and many others.

Pakistan’s total foreign exchange reserves amounted to $ 25.027 billion; foreign reserves held by the SBP amounted to over $ 18 billion and commercial banks to $ 6.45 billion. In the week ending December 10, 2021, foreign exchange reserves declined by $ 90 million to $ 18.56 billion.

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