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$2.355b new loan accords inked in Q1

Ministry of Economic Affairs revealed that the govt has received $1.42b from int'l capital market through tap issuance
Among the multilateral development partners, the ADB emerged as the largest partner in terms of new commitments of Foreign Economic Assistance of $500m (21 percent of total commitments). Reuters
Among the multilateral development partners, the ADB emerged as the largest partner in terms of new commitments of Foreign Economic Assistance of $500m (21 percent of total commitments). Reuters

The government of Pakistan signed new loan agreements worth $2.355 billion with various bilateral and multilateral development partners, and foreign commercial banks during the 1st quarter of the current fiscal year 2021-22, revealed the Ministry of Economic Affairs.

According to the official data, out of the total new agreements, $628 million worth of financing agreements were signed with multilateral development partners, and $686 million with foreign commercial banks.

It further revealed that the government has received $1.42 billion from international capital market through tap issuance. The Eurobonds were issued at the premium amount of $42 million.

Among the multilateral development partners, the ADB emerged as the largest partner in terms of new commitments of Foreign Economic Assistance (FEA) of $500 million (21 percent of total commitments) followed by the World Bank.

Out of $2.355 billion, an amount of $1,727 million (or 73 percent of the total commitments) was earmarked as program financing through foreign commercial banks and Eurobonds. An amount of $628 million (or 27 percent of the total) was allocated for project financing. No funds have been committed for commodity financing in the 1st quarter.

During the period under review, the government committed $628 million as project financing for the procurement of Covid-19 vaccines and education and training sector of the economy. The ADB has committed $500 million against the project “Covid19 Vaccine Support Project”.

Further $127 million has been committed by the World Bank to finance a project titled, “Sindh Early Learning Enhancement through Classroom Transformation (SELECT)” earmarking 20 percent of project financing to education and training.

Disbursements of $3.216 billion during July–September 2021 were mainly under the projects and programmes loans/grants from multilateral, bilateral development partners, and financial institutions.

The composition of disbursements is as follows: (a) $1,597 million or 50 percent of total disbursements were from the multilateral development partners, mainly ADB, World Bank, and IsDB; (b) $468 million or 15 percent of total disbursements were from foreign commercial banks. (c) $1,000 million or 31 percent of total disbursement were from international bond holders;(d) USD 109 million or three percent of the disbursements were from bilateral development partners particularly, China, the USA, and the UK.

Around $1,597 million (50 percent worth of disbursement) came from multilateral development partners and disbursement of $1,000 million (31 percent of total disbursements) was from bond holders. Among multilateral development partners, the World Bank and the ADB were the largest development partners with disbursements of $529 million and $461 million (16 percent and 14 percent of total disbursement) respectively followed by the IsDB and the AIIB. China was the largest among bilateral partners who disbursed $73 million or 67 percent of the total bilateral development partners’ share of $109 million.

An amount of $468 million (or 22 percent of the total) was obtained from foreign commercial banks and $796 million (or 38 percent of the total) as project financing. The remaining 21 percent of the disbursements were for the commodity financing purposes.

During the 1st quarter of 2021-22, the largest share of disbursements i.e. 37 percent of the total was received for Covid19 financing needs. On the other hand, the largest sector in terms of disbursements is energy and power, having 24 percent share in the total project assistance of $853 million, followed by transport and communication (11 percent share), transport and communication (11 percent share), and physical planning and housing (six percent share in the total project assistance).

As of 30th September 2021, Pakistan’s total external public debt stood at $86.8 billion. Pakistan’s external public debt is derived from three key sources, namely, multilateral external debt comprising 41 percent share in the total external public debt (inclusive of IMF funding), followed by bilateral external debt (24 percent share in the total), and foreign commercial banks (11 percent share in the total).

The remaining 16 percent of the external public debt consists of State Administration of Foreign Exchange (SAFE), China’s deposit and Eurobonds (inclusive of Sukuk).

The government paid an amount of $1,353 million during July–September 2021 on account of debt servicing of external public loans. This consists of principal repayment of $1,036 million and interest payments of $317 million

During the period under review, the bulk of repayments were made to foreign commercial banks, having 32 percent share in the total repayments, followed by the World Bank (22 percent share), ADB (20 percent share), and China (14 percent share in the total).

For the period under review, net transfers to the government’s external public debt were $2,065 million, whereas, it was $1,408 million during the corresponding period last year. The share of concessional external loans with longer maturity increased by $1,145 million (multilateral and bilateral loans) and the share of commercial borrowing has increased by $1,143 million, this includes net borrowing of $143 million from commercial banks and $1,000 million from Eurobonds.

This report was first published in Business Recorder on February 4, 2022.

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