March 19, 2021 (MLN): Pakistan has received $7.21 billion total external inflows during July-Feb FY21 from bilateral and multilateral development partners, foreign commercial borrowing, and time deposits to restructure its economy and finance its development projects.
This foreign aid provides a wide range of support in the areas of capital formation, employment, health, education, public transport, water reservoir, and more, driving economic growth and helping to promote socio-economic and human development in Pakistan.
According to the data released by the Policy Analysis & Development Wing of EAD, these external inflows from multiple sources are around 59% of the annual budget estimates of $12.23 billion for the entire fiscal year FY21. In the corresponding period of FY20, the external inflows were $6.28 billion i.e. around 51% of the annual budgeted amount of $12.96 billion.
Going into details made available by the Policy Analysis & Development Wing of EAD, out of $7.21 billion, the government received $1.35 billion or 19% in the form of program/budgetary support assistance to restructure Pakistan’s economy, $3.11 billion (43%) as foreign commercial borrowing to repay maturing foreign commercial loans, $1.35 billion (19%) as project assistance to finance its development projects for improving the socio-economic development of the country and for asset creation and $399 million (05%) as commodity financing while $1 billion (14%) received as safe deposits from China.
The disbursement from bilateral and multilateral development partners also maintained a strong trend and is $3.10 billion of foreign economic assistance during 8MFY21 against the budgetary allocation of $5.811 billion for FY21 on concessional terms with a longer maturity. These healthy inflows also helped to improve foreign exchange reserves and exchange rate stability, the monthly bulletin of Foreign Economic Assistance by the Economic Affairs Division (EAD) reported.
Foreign assistance obtained by Pakistan through multilateral sources during July-Feb FY21 totaled $2.83 billion. Amongst the multilateral development partners, Asian Development Bank provided $1.21 billion and World Bank $909 million against the budgetary allocation of $2.257 billion.
The monthly bulletin revealed that the collective disbursement from bilateral donors amounted to $272 million during 8MFY21 wherein Pakistan received $95.4 million from China, followed by the United States with $76.6 million and France with $34.8 million.
Increased level of external inflows from multilateral and bilateral development partners is indicative of their confidence in development priorities and policies of the government including implementation of reforms in the priority areas of fiscal and debt management, energy sector, and ease of doing business.
The strong official inflows during the first seven months of the current fiscal year helped the government to discharge its external public debt obligation of $4.12 billion against the annual repayment estimates of $10.36 billion for the entire Fiscal Year. Of which, $3.47 billion (84% of total external public debt servicing) was repaid as principal and $650 million (16%) as interest on the outstanding stock of external public debt.
During July-Jan FY21, the monthly bulletin disclosed that the government settled $2.10 billion worth of foreign commercial loans. Pakistan repaid $1.11 billion to multilateral and $103 million worth of external loans to bilateral development partners. Considering foreign exchange constraints, financing of development projects and repayments of these huge external public debts compel the incumbent government to further borrow from multiple sources.
For the period Jul- Jan FY21, net transfers to the government were $3.04 billion. Positive net transfers came mainly due to higher inflows from multilateral Development Partners & due to $1 billion in respect of time safe deposit from China.
Interestingly, the stock of external loans which was obtained on market-based instruments has increased merely by $796 million and the share of concessional external loans with longer maturity increased by $1.24 billion, the report concluded.
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