Government Signed Loan Agreements of $6.517 Billion During Q2FY2021

During the second quarter of the fiscal year 2020-21, the government signed new loan agreements worth $6.517 billion with various development partners, SAFE deposits, and foreign commercial banks.

This was revealed in the Economic Affairs Ministry quarterly report released on Thursday. Out of the total new agreements, $3.458 billion worth of financing agreements were signed with multilateral development partners, $2.01 billion with foreign commercial banks, $1 billion as a SAFE deposit, and $49 million with bilateral development partners.

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Around $2.01 billion worth of agreements that constituted 31 percent of the total new commitments, were commercial borrowings. This financing was arranged to refinance maturing commercial debt.

An amount of $1,000 million (15 percent) has been arranged from China SAFE authority to repay a deposit to a friendly country.

After commercial banks and the SAFE Deposit, the World Bank emerged as the largest development partner in terms of new commitments of FEA (34 percent) followed by the Asian Development Bank (nine percent), the Islamic Development Bank (six percent), and the Asian Infrastructure Investment Bank (four percent).

During the period an amount of $4.382 billion has been committed as budgetary support, of which $1.363 billion was committed by multilateral development partners as program financing.

The program financing has been arranged to broaden and deepen the financial system and improve fiscal management and regulatory framework to foster growth and competitiveness in Pakistan.

Japan has also committed to providing a grant of $9.7 million to combat the pandemic. The remaining amount of $2.01 billion was arranged from foreign commercial banks and $1,000 million from the SAFE authority.

An amount of $1.749 billion was allocated for project financing. The remaining amount of $386 million has been arranged for commodity financing purposes.

The commitments are planned to be disbursed over the time span of five to six years. Disbursements of $5.7 billion during July-December 2020 were mainly under the projects and programs loans/grants from multilateral, bilateral development partners, and financial institutions.

The composition of disbursement is as follows:

1. $2,387 million or 42 percent of the total disbursements were from the multilateral development partners, mainly the Asian Development Bank, the World Bank, the Islamic Development Bank, and the Asian Infrastructure Investment Bank;
2. $2,054 million or 36 percent of total disbursements were from foreign commercial banks;
3. $1,000 million or 18 percent of total disbursement were from the SAFE deposit; and
4. $260 million or 5 percent of the disbursements were from bilateral development partners particularly China, France, the USA, and the UK.

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As of 31 December 2020, Pakistan’s total external public debt stands at $82.2 billion. 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 50 percent inclusive of the IMF), followed by bilateral 27 percent, and foreign commercial banks 11 percent, while the remaining 13 percent of debt consists of SAFE.

As of 31 December 2020, 70 percent of the total external public debt consists of loans on fixed interest rates while 30 percent of the loans are obtained on floating interest rates.

The government had paid an amount of $3,398 million during July-December 2020 on account of the debt servicing of external public loans. It consists of a principal payment of $2,680 million and an interest payment of $718 million.