The government has got only $3.2 billion in the first two months (July and August) against the envisaged target of $17.3 billion for the whole financial year.

The real challenge has surfaced in the wake of rising gap, as out of the total external debt servicing of $24.6 billion requirement, the government has sought total dollar inflows of $17.3 billion in the shape of foreign loans, indicating a gap of $7.3 billion.

Pakistan’s economic managers had relied on rollover of $7 billion from China and Saudi Arabia, so there was nothing to worry about external financing gaps. However, they did not have any answer as to how the dwindling foreign exchange reserves will be built up when the government has given a target on account of Net International Reserves (NIR) under the IMF program conditions.

There are real challenges lying ahead, as certain projected foreign loans may not be materialised and this can lead to a serious balance of payment crisis in months ahead.

Alarm bells must have rung in the Q Block (Ministry of Finance), Economic Affairs Division (EAD), and State Bank of Pakistan (SBP) over the dismal pace of disbursements of foreign loans and grants which slowed down after the installation of ,caretaker setup.

The government secured $2.89 billion in July 2023 mainly from Saudi Arabia’s deposits of $2 billion, while $316 million was obtained in August 2023. The official data released by the EAD did not show the disbursement of $1.1 billion loan tranche from the IMF, which the Fund provided during the ongoing financial year under the $3 billion Standby Arrangement (SBA) program.

The official data of EAD shows that Islamabad got disbursement of a guaranteed loan of $508 million for the Pakistan Air Force in July 2023.

From multilateral creditors, Pakistan has received disbursements of loans to the tune of $335.8 million in the first two months of the current fiscal year; as of July 2023, the disbursement stands at $193.16 million, and $142.7 million in August 2023. The World Bank’s IDA credit disbursement remained the largest one, as it provided $161 million in the first two months of the current fiscal year. The Islamic Development Bank has disbursed $97.1 million.

From bilateral creditors, Islamabad has received $221.36 million in the first two months of the current fiscal year and, so far, Saudi Arabia has clinched the top position by disbursing $200 million for the oil facility.

The US has disbursed $11.6 million and no other country such as China and Denmark has so far disbursed loans or grants in the current fiscal year.

It is highly alarming that the government is unable to get commercial loans despite setting an envisaged target of $4.5 billion. Although, some banks have approached the government keeping in view the higher interest rates around the globe, the Ministry of Finance is making it really hard to secure commercial loans.

On the other hand, the government also planned the launch of international bond to fetch $1.5 billion for the current fiscal year. At a time when the US treasury rate was on the higher side and standing at 5.5 percent, it was not possible to do so, at least in the first half of the current fiscal year.

Top official sources said the Fed Reserve might reduce interest rates in the next calendar year 2024, so Islamabad might launch international bonds after March 2024 if the international market is ripe by witnessing a reduction in interest rates.

The government secured $140 million as Naya Pakistan Certificate and $2 billion as time deposit in the first two months of the current fiscal year. It secured $439.32 million in the same two months of the last financial year 2022-23.

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