ISLAMABAD: The government of Pakistan is planning to borrow another 15 billion during the next financial year, of which more than 10 billion will be used to repay old loans while the remaining amount will be used to stabilize the country’s foreign exchange reserves.
Finance Ministry sources say that if the government manages to manage the 15 billion debt, it will be the largest loan in any financial year in the history of the country and the country will be burdened with more debt.
Like the previous government, the Pakistan Tehreek-e-Insaf (PTI) government has failed miserably to get rid of debts, increase domestic exports, increase remittances and bring in foreign direct investment.
At present, the 12 billion in foreign exchange reserves held by the State Bank of Pakistan are all in demand. This is the same situation as it was during the PML-N era. In its April report, the IMF set the SBP’s foreign exchange reserve limit at 15.6 for the fiscal year 2020-21, which it finds difficult to obtain without further borrowing as domestic exports have increased marginally while overseas Remittances from Pakistanis appear to be declining slightly.
The finance ministry expects to receive 15 15 billion in loans from various financial institutions, commercial banks, Eurobonds and the IMF. Pakistan’s dependence on foreign debt can be gauged from the fact that from July 2018 to June 2021, it would have borrowed 40 40 billion in new loans. Debts will add to the burden.
According to official estimates, the value of foreign loans taken by the PTI government will reach 25 25 billion by the end of June, of which .5 16.5 billion will be spent on repaying old loans. The government is making every effort to meet the conditions for the next tranche of the loan from the IMF.
For USD 15 billion in new loans, the government will need to reinstate the IMF program. The government is expected to receive 2. 2.1 billion from the IMF over the next fiscal year, depending on whether the government approves the IMF. Fulfil the three conditions.
During the current financial year, the IMF has lent USD2.8 billion to Pakistan, of which 4 1.4 billion has been provided as emergency assistance to deal with Corona. The government also intends to borrow 3. 3.4 billion from foreign banks. If Pakistan gets relief in repayment of loans from G20 countries, then it will not need commercial loans till December 2020.