Pakistan’s total external public debt stood at $77.9 billion as of June 30, 2020, compared to $73.4 billion a year ago, registering 6 percent growth, says the Ministry of Economic Affairs Division (EAD). The Ministry released an annual report on foreign economic assistance (FY 2019-20) on Friday that noted that as of June 30, 2020, 70 percent of total external public debt consists of loans on fixed interest rates while the remaining 30 percent loans are obtained on floating interest rates.
The composition of external public debt demonstrates that Pakistan’s external public debt is derived from three key sources. The major source is multilateral debt (comprising 51 percent inclusive of IMF (10 percent), followed by bilateral 31 percent (inclusive of China’s SAFE deposits (4 percent)), 10 percent from foreign commercial banks, and 8 percent bonds (inclusive of Eurobonds and Sukuk).
The report further stated that during the fiscal year 2019-20, the government signed new agreements worth $10.447 billion with various development partners and foreign commercial banks as compared to $8.4 billion a year before, registering a growth of 23.8 percent.
Under the new agreements, the development partners are likely to disburse the committed amount in the next five to six years. Out of this, 99 percent of the new commitments were for the loans, and the rest of the 1 percent was for the grants commitments.
Out of total new agreements, $6.791 billion worth of financing agreements were signed with multilateral development partners, $3.463 billion with foreign commercial banks, and $193 million with bilateral development partners. Around $3.463 billion worth of agreements, which constituted 33 percent of the total new commitments, were by the commercial banks.
The Asian Development Bank emerged as the largest development partner in terms of new commitments of foreign economic assistance $3.112 billion (30 percent) followed by World Bank $2.239 billion (22 percent), Islamic Development Bank $756 million (7 percent), and Asian Infrastructure Investment Bank $540 million (5 percent). These five financial institutions extended financing of around 98 percent of total new commitments.
The report further noted that 69 percent of the new commitments during the fiscal year 2019-20 were made under the category of budgetary support. This high level of budgetary support was secured mainly to offset the socio-economic impact of the COVID-19 pandemic and to meet the higher external financing requirements for external debt retirements. About 26 percent of the new commitments were allocated for project financing while the rest of the new commitments i.e. 5 percent were for commodity financing.
An amount of $7.5 billion has been committed as budgetary support; of which $4 billion was committed by multilateral development partners as program financing and the remaining was obtained from foreign commercial banks. Transport and communication is the key priority of the government for the fiscal year 2019-20 with a total share of 40 percent, health emerged as a second priority with a share of 19 percent, followed by physical planning and housing (12 percent), rural development and poverty reduction (10 percent), energy power (9 percent) and agriculture (6 percent).
During the fiscal year 2019-20, total disbursement was $10.7 billion including 97 percent were loans and 3 percent were grants. An amount of $6.5 billion was disbursed by multilateral and bilateral development partners as compared to $4.1 billion a year before, registering 59 percent growth. In addition, the government also raised $3.4 billion from foreign commercial sources to meet its external debt obligations and support the balance of payments. Disbursements of $10.7 billion during the fiscal year 2019-20 were mainly under the projects and programs loans/grants from multilateral, bilateral development partners and financial institutions.
The composition of disbursement is
- $5.645 billion or 53 percent of total disbursements were from the multilateral development partners mainly from Asian Development Bank, Islamic Development Bank, Asian Infrastructure Investment Bank, and World Bank;
- $3.373 billion or 32 percent of total disbursements were from foreign commercial banks mainly to refinance maturing commercial debt of past periods;
- $1.644 billion or 15 percent of the disbursements were from bilateral development partners particularly Saudi Arabia, China, and the UK.
After commercial banks, ADB is the largest development partner with a disbursement of $2.824 billion (26 percent) followed by World Bank (13 percent), IsDB (8 percent), and Saudi Arabia (7 percent). During the period under review, 74 percent of the total disbursements were program financing/budgetary support, 19 percent project financing while the remaining 7 percent commodity financing mainly from Islamic Development Bank for the purchase of crude oil. Out of this total budgetary support component, $4.6 billion was the program support, and the remaining $3.3 billion was arranged as re-financing by the Finance Division from various foreign commercial banks.
It further noted that the stock of external loans that were obtained via market-based instruments has declined by $2.062 billion (bonds and commercial borrowing) and the share of concessional external loans with longer maturity increased by $3.871 billion (multilateral and bilateral loans). The report further stated that the government paid an amount of $10.4 billion during the fiscal year 2019-20 on account of debt servicing of external public loans. It consists of a principal payment of $8.5 billion and an interest payment of $1.9 billion.
