While India received a record $49.6 billion as FDI for the current fiscal, Pakistan, on the other hand is virtually on a begging spree looking out for interest free doles from Muslim countries and new loans from international financial institutions

Islamabad: Cash-strapped Pakistan is planning to seek USD 15 billion in new loans to return its maturing external public debt and build up the official foreign exchange reserves, the highest amount to be borrowed by the country in a single year, a media report said on Sunday.

Out of the USD 15 billion estimated external borrowings in fiscal year 2020-21, nearly USD 10 billion will be used to return the maturing loans, excluding interest payments, sources in the Ministry of Finance told The Express Tribune.

The paper reported that the remaining amount will become a part of the external public debt that has already increased to USD 86.4 billion as of March end this year.

The estimated USD 15 billion borrowings will be the highest loans to be taken by the country in a single year, highlighting the challenges that the government faces due to the deepening debt trap.

Because of the inability to enhance non-debt creating inflows, Pakistan’s USD 12 billion gross official foreign currency reserves held by the State Bank of Pakistan (SBP) are largely the product of borrowings.

For fiscal year 2020-21, the International Monetary Fund (IMF) has projected SBP’s reserves at USD 15.6 billion in its April report, which will again be impossible without borrowings, as the Fund sees only a slight increase in exports and marginal decline in remittances in the next fiscal year.

The finance ministry has estimated the gross receipt of USD 15 billion from bilateral and multilateral lenders, commercial banks, issuance of Eurobonds and the IMF for fiscal year 2020-21, according to the sources.

Pakistan’s heavy reliance on foreign creditors can be gauged from the simple fact that from July 2018 to June 2021, it will have taken USD 40 billion new loans. Out of this, USD 27 billion would be consumed in paying old loans and rest USD 13 billion will be added in external public debt.

As per the official estimates, by the end of June this year, the current government would have taken nearly USD 25 billion loans in its tenure and USD 16.5 billion were to be consumed in paying principal loans.

The estimated fresh borrowing in the next fiscal year will be 7 per cent or USD 1 billion higher than the outgoing fiscal year’s revised estimate of USD 14 billion worth of external inflows, said the sources.

Pakistan is currently under the IMF programme but it is technically suspended for the last few months.

The materialisation of the USD 15 billion external loans will also depend upon the revival of the IMF programme, as the government has included loans from the IMF and budgetary support from the World Bank and the Asian Development Bank (ADB).

Pakistan expects to receive USD 2.1 billion from the IMF in the next fiscal year, subject to successful completion of quarterly reviews.

This year, the IMF gave USD 2.8 billion, including USD 1.4 billion emergency COVID-19 assistance.

The government still has a plan to borrow USD 3.4 billion from the foreign commercial banks, which will essentially be rollovers of the existing commercial loans.

If Pakistan avails the G-20 debt relief, it may not be able to contract fresh commercial loans till December 2020.

The bilateral inflows are estimated at just USD 770 million due to the completion of major ongoing projects of China-Pakistan Economic Corridor (CPEC).

Pakistan has estimated USD 6 billion loans from the multilateral creditors in the next fiscal year. The ADB is expected to lend USD 1.4 billion as against USD 2.8 billion in this fiscal year.

The World Bank may extend USD 2.9 billion in new loans after all its policy loans did not materialise in this fiscal year, said the sources.

The Islamic Development Bank is expected to extend USD 1 billion in fresh loans and USD 500 million receipts are estimated from the Asian Infrastructure Investment Bank (AIIB), said the sources.

It has to be seen if the government ventures in the international capital markets before December 2020 due to its decision to avail debt relief from G-20 nations, according to the report.