Pakistan gets $800 million foreign aid during July’20

August 24, 2020 (MLN): Pakistan has received $800 million foreign assistance during the first month of the fiscal year 2020-21 from bilateral and multilateral development partners, foreign commercial borrowing, and commodity financing from Islamic Development Bank and Saudi Arabia to restructure its economy and finance its development projects.

This foreign aid in Pakistan is a major source of socio-economic & human development, capital formation which can trigger economic growth.  

According to the data released by Policy Analysis & Development Wing of EAD, this external inflows from multiple sources is around 7% of the annual budget estimates of $12.23 billion for the entire fiscal year FY 2019-21. In the corresponding period of the fiscal year 2019-20, the external inflows were $657 million i.e. around 5% of the annual budgeted amount of $12.958 billion.

In the aftermath of Covid-19 and its persistence in the country the disbursements of project financing from development partners dried up during the last quarter of the outgoing fiscal year 2019-20. The pandemic has closed down most of the economic activities across the country including development project activities. However, after the eventual lifting of lockdown by the government, the economic activity is reviving which may lead to jack-up the project financing in the current fiscal year 2020-21.

Going into details provided EAD, out of $800 million, the government received $585 million or 73% in the form of program/budgetary support assistance to restructure Pakistan’s economy, $115 million (13%) as foreign commercial borrowing to repay maturing international Sukuk and other foreign commercial loans, $100 million (14%) as project assistance to finance its development projects for improving the socio-economic development of the country and for asset creation.

During the month of July’20, the bilateral and multilateral development partners have disbursed $685 million of foreign economic assistance against the budgetary allocation of $5.811 billion for the fiscal year 2020-21 on concessional terms with a longer maturity, the monthly bulletin of Foreign Economic Assistance by Economic Affairs Division (EAD) reported.

Foreign assistance obtained by Pakistan through multilateral sources during July’20 totaled $661 million. Amongst the multilateral development partners, Asian Development Bank provided $131 million and World Bank $528 million against the budgetary allocation of $2.257 billion.

During the period under review, it is pertinent to mention that no grant has been provided by multilateral development partners.

The monthly bulletin revealed that the collective disbursement from bilateral donors amounted to $24 million during July’20 wherein Pakistan received $23 million from France, followed by $1 million from the United States during the first month of FY21.

On external outflows front, during Jul-June 2019-20, total servicing of external public debt was $10.140 billion against the annual repayment estimates of $10.423 billion for the entire fiscal year. Of this, $8.338 billion (82% of total external public debt servicing) was repaid as principal and $1.802 billion (18%) as interest on the outstanding stock of external public debt.

The monthly bulletin disclosed that Pakistan settled $2.21 billion to multilateral and $725 million worth of external loans to bilateral development partners during FY2019-20.

Moreover, during FY20, the government repaid $4.40 billion worth of foreign commercial loans and repaid $1 billion worth of international Sukuk issued in December 2014. 

Given 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.

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