Pakistan is planning on borrowing a staggering $13 billion in the next fiscal year mainly to repay the loans it has previously taken. Once the plan gets implemented, the amount will be Pakistan’s biggest borrowing in a single year since the country’s inception.
The current government has shattered all previous records of borrowed loans, on the other hand, the foreign reserves have hit an all-time low.
Pakistan’s foreign currency reserves stand at around $11 billion which will further slip to $9 billion by June this year, IMF estimates.
IMF’s report on Pakistan’s foreign reserves added;
An elevated current account deficit and increased external obligations are expected to double external financing needs in the medium term, taking a further toll on foreign exchange reserves.
The report adds that Pakistan’s foreign financial needs might go as high as $27 billion in the upcoming fiscal year.
The government borrowed $10.1 billion in 2016-17 fiscal year alone and the trend will continue to grow in the forthcoming financial year as well.
The current figures in the borrowing plan are 63% higher than the original estimates for current FY. For the current year, the government estimated to take 8 billion in loans, $7.3 billion of which were already taken in the first 8 months.
The projected amount is exclusive of the grants that Pakistan might borrow from IMF. Pakistani governments have relied heavily on loans to bail out the economy instead of creating debt-free foreign inflows. This is the primary reason why country’s debt has reached a mind-boggling $90+ billion amount.
The PML-N led government so far has borrowed record-breaking $40 billion in external debt and liabilities. Back in 2013, Pakistan owed $61 billion and the amount is expected to touch $93 by the end of current government’s tenure. According to an IMF report, Pakistan’s current account deficit could reach as much as 4.4% of total GDP in next year.
Overall, the breakdown of the foreign borrowing plan for FY 2018-19 goes like this;
- $2.02 billion to be borrowed from the World Bank,
- $1.1 billion to be borrowed from the Asian Development Bank (ADB) and,
- $1.5 billion to be borrowed from the Islamic Development Bank (IDB).
- $2 billion to be borrowed as foreign commercial loans.
- $2.9 billion to be borrowed from China. Overall, Pakistan expects $3.5 billion in loans from bilateral sources.
The country is planning to float $3 billion worth of Sukuk and Euro bonds for repayment of previous loans as well.