Pakistan’s foreign loans surge to $2.8 nillion in July

In July 2023, foreign loans soared to $2.8 billion, a remarkable increase from a mere $185 million in the corresponding month of the previous year (2022), attributed to the impact of these significant external borrowings.

Islamabad: Pakistan‘s total foreign loans increased to USD 2.8 billion in the first month (July 2023) of the current fiscal year as a result of additional USD 2 billion time deposits from the Kingdom of Saudi Arabia (KSA) and USD 508 million in guaranteed loans from China for the Pakistan Air Force to purchase “Dragon” multirole fighter aircraft, The News International reported.

In July 2023, foreign loans reached USD 2.8 billion, up from a pitiful USD 185 million in the same month the previous year (2022), thanks to these two big foreign loans. In July 2023, Pakistan also received USD 100 million in the form of an oil facility from the KSA, as reported by The News International.

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The News International is one of the largest English dailies in Pakistan.

All of these dollar inflows assisted Islamabad in increasing its State Bank of Pakistan (SBP)-held foreign exchange reserves. The government must maintain the overall guarantees within the specified limits agreed with the IMF under the USD 3 billion SBA plan because there is a limit associated to them under the IMF programme. In order to keep the guarantees within the agreed-upon ceiling of the IMF programme, Pakistan has also supplied another USD 3 billion in guarantees for the Chashma-5 nuclear power plant. However, the ECC had also resolved to include these guarantees gradually.

In the financial year 2023–2024, the total target was to collect USD 17.3 billion from all multilateral and bilateral creditors; however, the first month (July 2023) saw significant dollar inflows after receiving USD 2 billion from the KSA in the form of additional deposits following the signing of a new programme with the IMF under a USD 3 billion Standby Arrangement (SBA), according to The News International.

Pakistan only received USD 185 million in the same month of the previous fiscal year because Islamabad was having trouble finishing the 6th and 7th reviews of the IMF programme under the Extended Fund Facility (EFF) at that time, in July 2022. EFF was finally reactivated in August 2022, but it remained halted until June 30, 2023, when it was finally finished without success.

Then, Pakistan and the IMF agreed to a new programme with a USD 3 billion SBA for a nine-month term, following which significant bilateral partners, particularly the Kingdom of Saudi Arabia, resumed sending dollars to the country as the latter got another USD 2 billion in time deposits. Therefore, the KSA made deposits summing USD 5 billion.

According to Economic Affairs Division (EAD) disbursement information, Pakistan received a guaranteed loan (CATIC) for the PAF in July 2023 in the amount of USD 508.34 million. In July 2023, Pakistan received USD 193 million from all other multilateral creditors, including USD 6.38 million from IFAD, USD 6.38 million from IDA, USD 22.59 million from ADB, USD 11.74 million from AIIB, USD 82.71 million from the World Bank’s IDA loan, USD 3 million from the World Bank’s IBRD lending, and USD 67 million in short-term loans from the Islamic Development Bank (IsDB), according to as reported by The News International.

Pakistan receives USD 113.8 million from all bilateral partners, including USD 100 million from Saudi Arabia as an oil facility, USD 8 million from the United States, USD 4.85 million from Korea, and USD 0.56 million each from France, Germany, and Japan.

In July 2023, Pakistan received USD 74 million via Naya Pakistan Certificates. The time deposits contributed USD 2 billion to the national coffers, assisting Islamabad in increasing its SBP-held foreign exchange reserves, The News International reported.