Govt plans to obtain Rs2.17tr foreign loans in FY21

Rs1.22tr to be spent on repayment of loans already taken

ISLAMABAD: The government has planned to obtain foreign loans worth Rs2.17 trillion in the next fiscal year (FY21), as compared to Rs2.188 trillion received in foreign loans during the outgoing financial year (FY20). 

The original estimate of foreign loan for the outgoing financial year was Rs3 trillion.

As per the budget papers, the incumbent government would be seeking Rs2.17 trillion in loans mainly to pay interests on loans already taken (debt servicing), other than various development programmes/projects.

However, foreign grants have been estimated to decline to Rs20.667 billion in both federal Public Sector Development Programme (PSDP) as well as projects outside the PSDP, compared to the Rs32.4 billion received by the country in FY20.

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According to budget documents, the government would procure Rs165 billion from the Islamic Development Bank in FY21, which would be in addition to Rs127.117 billion received from the bank in FY20.

Meanwhile, under the deferred payment arrangement of oil with Saudi Arabia, the government is estimated to get a further relief of Rs165 billion in the next fiscal year. Of the Rs480 billion oil facility, the government only availed Rs138.840 billion in the outgoing financial year.

Through Euro Bond/International Sukuk, the government would obtain Rs247.5 billion in FY21. Besides, it would also receive a loan of Rs647.213 billion from commercial banks.

Moreover, the government would get Rs211.014 billion from the International Monetary Fund (IMF) under the already approved loan programme. In the outgoing year, it received Rs456.6 billion from the international lender.

Of the Rs2.17 trillion external loans, Rs218 billion were project loans, with the federal government, ministries/divisions and provinces having a share of Rs66.822 billion, Rs13.274 billion and Rs53.54 billion, respectively.

As per the documents, the government has estimated an arrangement of at least Rs44.750 billion project loans outside the PSDP, including Rs2.34 in grants. If project loans outside the PSDP are included, the total external resources are estimated to be Rs2.22 trillion in FY21.

Out of the Rs2.22 trillion foreign loan arrangement, the government would be spending Rs1.22 trillion for repayment of loans, while Rs183.691 billion would be used for the repayment of short-term credit. This would leave net external resources at mere Rs810.347 billion in the next fiscal year.

The budget document has acknowledged that foreign financial support is useful if utilised productively and efficiently.

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Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]pk

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