These massive payments eroded the country’s foreign exchange reserves.
Pakistan paid $9.436 billion on account of debt servicing. The government paid an amount of $9.436 billion during July – March on account of debt servicing of external public loans. This consists of principal repayment of $8.137 billion and interest payments of $1.299 billion. The breakup of $9.436 billion showed that Pakistan paid $4.442 billion to the commercial banks, $1.340 billion against bonds, $834 million to International Monetary Fund (IMF) and repaid $764 million to the Asian Development Bank (ADB) in July-March 2021.
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According to the official documents of the Ministry of Economic Affairs, Pakistan had repaid $751 million to the World Bank and $464 million to the Islamic Development Bank (IsDB (Short Term). The country has paid $490 million to China, $18 million to Kuwait and $180 million to others during first nine months of the ongoing financial year.
The loan repayment and financing of current account deficit are two main reasons behind decline in foreign exchange reserves of the country. The government is continuously taking foreign loans to build the country’s foreign exchange reserves. Pakistan had made disbursements of $11.935 billion during July – March 2021-22 that was mainly under the projects and programs loans/grants from multilateral, bilateral development partners and financial institutions.
The breakup showed that Pakistan had taken $2.484 billion from foreign commercial banks, $2.440 billion from multilateral development partners, $3 billion as safe deposits, $2 billion committed as of Eurobonds and $1.bllion from international capital market through tap-issuance.
Account of Debt Servicing
Among the multilateral development partners, the following banks emerged as the largest partner in terms of new commitments of FEA during the period under review: ADB with USD 1,105 million (45 per cent of multilateral partners), Islamic Development Bank with USD 1,014 million (USD 762 million as short term and USD 252 million as long term), The World Bank committed USD 321 million (13 per cent of multilateral partners).
Out of the total commitments agreed during Jul-Mar of FY 2021-22, USD 7,525 million (66 per cent of total commitments) was committed by international financial investors under bonds, commercial banks and safe deposits to strengthen the foreign exchange reserves and stabilize the exchange rate.
While 17% of the commitments were earmarked for commodity financing, followed by project financing with USD 1,275 million. An amount of USD 600 million was committed for program financing through ADB to broaden and deepen the financial system, improve fiscal management and to bring financing sustainability in the energy sector to foster growth in Pakistan.
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The composition of disbursements is as follows: a) USD 3,949 million or 33 per cent of total disbursements were from the multilateral development partners, mainly ADB, World Bank, and IsDB; b) USD 2,623 million or 22 per cent of total disbursements were from foreign commercial banks; c) USD 2,000 million or 11 per cent of total disbursement were from international bondholders; d) USD 321 million or three per cent of the disbursements were from bilateral development partners particularly Saudi Arabia, China, and USA; e) USD 3,000 million or 25 per cent of total disbursements were recorded under SFD Time deposits.
Pakistan’s total external public debt stood at USD 88.765 billion on 31st March 2022.
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