Govt receives $9.7bn in foreign loans in 9MFY24, falls short of targets

Low inflows prompt the central bank to purchase dollars from local market

Pakistan received $9.7 billion in foreign loans during the first nine months of the current fiscal year, falling short of expectations.

As per a news report, foreign inflows remained meager at just $204 million in March 2024, prompting the government to resort to dollar purchases from the local market to mitigate the shortfall.

Despite completing the IMF program, the country’s credit rating remained unchanged, hindering its ability to issue sovereign international bonds and acquire new foreign commercial loans.

The loans, consisting of budget and balance of payments support as well as project financing, failed to significantly bolster the country’s foreign exchange reserves, which remained at $8 billion.

The inability to tap into Western markets for sovereign bonds and acquire fresh commercial loans was attributed to the persistently poor credit ratings and high borrowing costs.

Finance Minister Aurangzeb emphasized the importance of improving credit ratings to facilitate fundraising efforts in the upcoming fiscal year.

Despite accolades for completing the IMF program, Pakistan’s credit rating remained unchanged, posing a challenge to the government’s economic recovery plan centered around boosting exports, attracting foreign direct investment, and increasing debt.

Unrealistic targets set by the Ministry of Finance and the Ministry of Economic Affairs exacerbated the situation, with only 32% of the annual estimate from the Asian Development Bank materializing.

While the World Bank and IMF remained major lenders, fulfilling part of their loan commitments, the country struggled to fully materialize pledges, including those from the Geneva conference for victims of the 2022 floods.

The Islamic Development Bank’s disbursements fell short of expectations, while efforts to secure financing from China faced hurdles linked to previous debt obligations.

Despite challenges, the government remains hopeful of meeting its financing needs and driving economic recovery with continued support from international lenders and strategic partners.

Monitoring Desk
Monitoring Desk
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