Pakistan just received $1.5 billion in loan disbursements from international lenders in the first four months of current financial years. The loan disbursement decreased 37% from July to October 2018. From July through October of fiscal year 2018-19, international creditors disbursed $1.46 billion loans, according to officials of the Ministry of Finance.The lenders had given $2.3 billion in the same period of last year, reflecting a reduction of nearly 37%.
Pakistan is looking for commercial loans from the private lenders but commercial loans are becoming expensive due to increase in London Interbank Offered Rate (Libor) interest rates. Most of these loans are signed at floating Libor plus 3% rates, said the officials.
Pakistan is not receiving enough foreign loans to meet Pakistan’s growing financing needs. The finance ministry authorities are expecting a boost in inflows in the next couple of months, as the modalities for Chinese commercial loans are being discussed. It might take a while before Chinese commercial loans materialised and disbursed to Pakistan.
China has not yet extended any commercial facility in the current fiscal year. In past two fiscal years, Chinese financial institutions had provided nearly $4.8 billion commercial loans, excluding the SAFE Deposits.
Pakistan needs to repay $11.77 billion during current fiscal year. About $7.7 billion of these loans will mature in the second half of the year. Pakistan needs cash to make the payments to international lenders. The government is trying to get a loan from IMF to solve the payment crisis. The first round of negotiations between Pakistani officials and IMF delegation in Islamabad failed to build consensus as IMF put forward tough conditions for the loan facility.
China in October released another $102 million for the China-Pakistan Economic Corridor (CPEC) project, taking its contribution to $528 million in the past four months. In this fiscal year, China has given $266.8 million for Sukkur-Multan motorway, $65.7 million for Havelian-Thakot project of CPEC and $185 million for the Lahore Orange Line project.
The $528-million Chinese loans were equal to 36% of the total economic assistance that Pakistan received from July through October, according to the officials. The multilateral lenders provided $470 million or nearly one-third of the total loans. The commercial loans made 27% of the total disbursements.
Pakistan saw a steep decline in the foreign currency reserves in the last few months,PTI government has been trying to persuade Saudi Arabia, United Arab Emirates and China to deposit money in the SBP’s reserves for soothing panicked markets. Saudi Arabia was the first country that promised to give a bailout package worth $6 billion to help Pakistan avert a default-like situation. Saudi Arabia also gave $16.5 million for project financing in the first four months.
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17 November, 2019