Islamabad:
Pakistan secured a record $ 26.7 billion in foreign loans during the last fiscal year, almost half of the loans in the form of previously obtained loans, indicating that the country’s elaborate dependence on multilateral and bilateral creditors.
The $ 26.7 billion paid out in the 2024-25 financial year was slightly higher than the previous financial year, according to data prepared by the Ministry of Economic Affairs, State Bank of Pakistan (SBP) and the Ministry of Finance.
Of the $ 26.7 billion in foreign loans, only $ 3.4 billion or nearly 13% for project financing was received, official details released by the Ministry of Economic Affairs Tuesday.
Such low receipts for project financing emphasize the difficulties of repaying the loans, as most foreign loans are used for budget support and to build currency reserves, of which no generate revenue for repayment.
The central bank’s gross currency reserves of $ 14.5 billion from end-June are largely the result of rollovers, refinancing existing loans and some fresh borrowing. This highlights Pakistan’s growing dependence on foreign creditors, making economic stability increasingly vulnerable.
According to the details, the Ministry of Economic Affairs reserved $ 11.9 billion in the federal government’s accounts, approx. 1.2 billion dollars higher than the previous fiscal year. The International Monetary Fund (IMF) paid $ 2.1 billion, while another $ 12.7 billion came as a roll of cash deposits from Saudi Arabia, China, United Arab Emirates and Kuwait.
Saudi -Arabia has placed $ 5 billion in cash deposits with Pakistan’s central bank and charges a 4% interest on the loans. The amount is rolled annually as Islamabad remains unable to repay. Interestingly, the IMF’s three -year program is based on the continued rollover of these loans of $ 12.7 billion, casting doubts about the depth of the external sector stability.
China has placed $ 4 billion in cash deposits and charges over 6% in interest. UAE has deposited $ 3 billion at the Central Bank.
China also paid $ 484 million in guaranteed loans in the last financial year, which was primarily used for asset purchases.
Pakistan failed to utilize international capital markets last financial year, and its planned borrowing of $ 1 billion through Eurobonds and Panda bonds were not realized. Instead, the government and the central bank secured an expensive foreign commercial loan, supported by multilateral guarantees, to bridge the gap.
With Pakistan’s credit rating in unwanted status, the country remains locked out of global capital markets and has to pay high interest rates on commercial loans and cash deposits.
The Ministry of Finance managed to secure $ 4.3 billion in commercial loans, mostly refinanced Chinese loans and others supported by guarantees from the Asian Development Bank (ADB).
ADB -paid $ 2.1 billion dollars in new loans, $ 500 million more than budgeted. Multilateral institutions contributed $ 6.9 billion overall, including $ 2.1 billion from the IMF.
The World Bank released $ 1.7 billion, $ 300 million shortly after the budgeted amount, and has not announced any new budget support loan for the current financial year.
The Islamic Development Bank paid out $ 716 million, and Saudi Arabia gave $ 200 million during an oil financing facility secured at 6% interest rates, making it an expensive loan.
Pakistan’s debt-to-BNP conditions and gross financing needs and GDP conditions are currently exceeding sustainable levels, according to the Ministry of Finance. A gross financing need above 15% of GDP is considered unsustainable. The Ministry of Finance’s previous projections suggest that Pakistan remains over this threshold for at least the next three years.
In its first review of the $ 7 billion program, the IMF marked several risks of consistent police implementation, including the resistance to reforms, underprested underpretation, high gross financing needs, low gross reserves and a significant net foreign currency -vice position for SBP. It also warned that socio-political tensions could erode repayment capacity and debt bearability.
In three financial years, FY2025-26 to FY2027-28, the IMF has projected Pakistan’s gross external financing requirements for $ 70.5 billion. These figures may vary depending on changes in the loss of current account, transfer streams and exports.
The IMF further stated that the overall risk of superb stress remains high, reflecting a high level of vulnerability to increased debt levels, large gross financing needs and low spare buffers. However, the government has assured the IMF that it closely monitors debt vulnerability arising from increased requirements for gross-toning funding and a significant sovereign bank Nexus.
