In order for the government to maintain foreign currency reserves at a historic high, the federal government has borrowed $1.315b from foreign commercial banks in the current financial year (July-April) 2016-17 against the annual budget of $2.005 b from foreign commercial banks for the current FY 2016-17.
As per the official documents, the government borrowed $300m from Industrial and Commercial Bank of China Limited in the current fiscal year (July-April) 2016-17. Arrangements have been finalized for $600m commercial loan from two Chinese banks to be utilized for balance of payments and budgetary support and received $300 million in January.
Another $200 million were obtained from Noor Bank PJSC for budgetary support and $700 million from China Development Bank as non-project aid during the month of September.
Moreover, $115 million were obtained Noor Bank PJSC in the month of March for budgetary support, cumulating the borrowing from foreign commercial banks to $1.315 billion in the current financial year.
To add to that, the government has issued Sukuk worth $1b at 6.5 pc rate of return during the period under review. The government has acquired $19 million from Asian Infrastructure Investment Bank (AIIB) in the current financial year which was not budgeted as per the Economic Affairs Division (EAD) data. The data also revealed that the government borrowed $5m from the Eco Trade Bank in the month of February which was also not budgeted.
Islamic Development Bank (IDB) has released $63.47 million in the current fiscal year against the budgeted $18.82 million.
As per the Moody’s assessment report, Pakistan’s fiscal strength is negative “(-) Very Low”, which is feared to hinder debt affordability and increases the debt burden. The report also stated that Pakistan’s limited tax base restricts its fiscal space, while low savings and shallow capital markets are unable to maintain stable domestic financing to meet budget deficit requirements.
