Govt seeks Rs32 trillion in loans for FY2024-25

The government announced its need for Rs32 trillion in loans for the fiscal year 2024-25, including rollovers from foreign banks and bilateral lenders. 

According to a news report, the success of this borrowing plan is contingent upon the timely approval of the International Monetary Fund (IMF) loan and China’s willingness to roll over nearly $7.9 billion in debt, including $4 billion in cash deposits and $3.9 billion in foreign commercial loans.

The Ministry of Finance’s annual borrowing plan outlines the requirement of Rs8.5 trillion to finance the budget deficit and an additional Rs23.4 trillion to repay maturing debt.

The total borrowing requirement excludes Rs2.6 trillion needed by the State Bank of Pakistan (SBP) to meet its obligations, including settling $3.7 billion owed to the United Arab Emirates, $4.2 billion in Chinese trade finance, and $900 million in maturing IMF debt.

For the fiscal year 2024-25, the estimated gross financing needs of Rs32 trillion represent 26% of GDP, a level considered unmanageable for a country like Pakistan. 

The borrowing plan indicates that Rs8.5 trillion is required for budget deficit financing, with 92% of this expected to come from domestic sources. Only Rs666 billion, or 8% of budget financing, will be sourced from foreign loans, a significant drop from previous years.

Securing timely rollovers of foreign loans, particularly from China, will be challenging. Beijing has provided $4 billion in cash deposits, $3.9 billion in foreign commercial loans, and $4.2 billion in trade finance facilities, all maturing this fiscal year.

The finance ministry also plans to raise an additional $1.2 billion in new commercial debt, but progress has been limited to initial expressions of interest from three foreign banks, with no new deals signed due to high costs. The government also aims to raise around $1 billion through the issuance of Panda Bonds and Green Bonds in international markets.

Additionally, the ministry plans to take three budget support loans totaling $800 million from the Asian Development Bank (ADB). These include a $400 million Climate and Disaster Resilience Enhancement Programme, $100 million for Women Inclusive Finance, and $300 million for Domestic Resource Mobilization.

The Debt Office cautioned that the Rs32 trillion borrowing plan is subject to changes based on domestic and international macroeconomic conditions and debt market dynamics.