The Industrial and Commercial Bank of China (ICBC) has given Pakistan a loan of $500 million. The loan has been taken in order to increase the foreign reserves of Pakistan.
Due to the absence of the Minister of Finance Ishaq Dar, the ministry is lacking the leadership to take executive decisions. The foreign currency reserves in State Bank of Pakistan has dropped by a staggering number.
Pakistan has borrowed a loan of $1 billion in the first four months of the fiscal year according to a source.
The Finance Ministry has already crossed the limit of the total loans to be borrowed in the fiscal year of 2017-2018. The Finance Ministry told the parliament that they would borrow $1 billion in the fiscal year 2017-2018.
The lack of political stability and the absence of the Finance Minister is also a cause for the economic downfall which can be seen recently.
Pakistan has taken loans from Citibank worth $267 million and Credit Suisse AG worth $255 million. Pakistan had taken short-term loan of $450 million from Credit Suisse-led consortium to pay off previous loans and as well as a loan of Credit Suisse.
ICBC and Citibank are helping Pakistan with Sukuk and Eurobond. The roadshows for the Sukuk and Eurobond began on Wednesday to raise $2 billion to $3 billion for propping up official foreign currency reserves.
This is not the first time that the government has borrowed money to stop the decline of foreign currency reserves. In the last fiscal year, Pakistan borrowed $300 million from ICBC to stop the rapid decline of foreign currency reserves. The current foreign reserve stands at $13.67 billion.
The foreign currency reserve shows a 122% deficit during the first four months as compared to the same time period last fiscal year. The foreign currency reserves depleted by $2.5 billion due to the import bill. The total deficit seen in the first four months of the current fiscal year is $5 billion.
During the past four and a half years, the PML-N government has been subjected to severe criticism for acquiring expensive foreign debt and increasing the overall debt pile.
According to a world-renowned economist Dr. Kaiser Bengali, the foreign loans are only productive when they are used for asset building to increase earnings but recently it can be seen the loans are taken to pay off the previous debt.
During July-October period of this fiscal year, Pakistan obtained $2.3 billion worth of foreign loans, which is equal to 30% of the annual budgetary estimates of $7.6 billion.
All of the data shows that Pakistan is borrowing more foreign debt to meet the budget requirements and to stop the decline of foreign currency reserves. This is an alarming situation that the country needed $1 billion in loans in the first four months of the current fiscal year.
The government should focus on infrastructure development which will eventually generate revenue.