by Mehtab Haider in The News, October 25, 2020
ISLAMABAD: Pakistan has to repay $4.4 billion on account of foreign commercial loans during the current fiscal year of 2020/21, indicating a pressure building up on forex reserves amid uncertainty over IMF’s stalled program.
The country has to make total external debt repayments to the tune of $10.3 billion during this year. It just paid out $798 million out of it. The remaining amount of over $9.5 billion is to be paid in 10 months period. The total external debt repayment of $10.3 billion constitutes $8.5 billion as principle payment of loans and $1.8 billion as interest repayment.
Pakistan’s external loans repayments on account of outstanding foreign commercial loans have been increasing at supersonic speed for two years.
It is a worrisome development amid Islamabad inability to revive the stalled International Monetary Fund’s program under $6 billion extended fund facility.
The discontinuation will further compel the incumbent regime to increase its reliance on easiest mode of financing. The foreign commercial loans are obtained for one year period maximum and existing circumstances explained that the reliance on foreign commercial loans is going to be increased manifold in months and quarters ahead.
In late March, IMF paused discussions with Pakistan on the second review of the three-year extended fund facility program following the coronavirus outbreak. The country received $991 million as the first installment soon after the EFF approval in July last year and following thickened uncertainty about the agreement surrounding in the air for a long time. The second tranche amounted to $452 million.
The foreign commercial loans have become the easiest source of generating dollar inflows at time of scarcity because the government can easily raise the money through bypassing crucial public procurement rules.
Out of total external public debt repayments of $798 million, a major chunk of $661 million or 83 percent was paid in shape of principle amount and $137 million or 17 percent was paid as interest payment as external debt obligation during this period.
Around 26 percent of total external public debt repaid during the last two months constitutes the repayments of the some foreign commercial loans which were obtained by the previous government.
In July-August, the government settled $204 million worth of commercial loans. Similarly, the government repaid $493 million to multilateral creditors and $102 million to bilateral partners. Considering foreign exchange constraints, financing of development projects and repayment of huge repayment of external public debt compel the incumbent regime to further borrow from multiple sources.
In July-August, net transfer to the government stood at $1 billion as positive net transfers came mainly due to higher inflows from multilateral development partners. The stock of external loans which was obtained on market based instruments decreased $28 million and the share of concessional loans with longer maturity increased $1 billion, according to economic affairs division. www.thenews.com.pk/print/734261-pakistan-to-repay-4-4bln-on-foreign-commercial-loans-in-fy2021
