Pakistan Plans $23 Billion in Foreign Borrowing for Next Fiscal Year

Islamabad: Pakistan plans to borrow a minimum of $23 billion in the next fiscal year, including the rollover of $12 billion in bilateral debt, to support its extensive development agenda and meet external financing needs.

Budget documents for fiscal year 2024-25 indicate that Pakistan will borrow at least $23.2 billion (Rs5.9 trillion), excluding any loans from the International Monetary Fund (IMF), which are intended for balance of payments support.

Of the $23 billion borrowing plan, $20 billion is accounted for in the budget documents. However, the $3 billion rollover by the United Arab Emirates (UAE) is not included in the federal accounts as it is also designated for balance of payments support.

Details reveal that Pakistan will secure $19 billion in loans for budget financing and to bolster foreign exchange reserves. This substantial amount highlights the country’s continued dependency on the IMF, World Bank, Saudi Arabia, China, UAE, and the Islamic Development Bank for its foreign and economic policies.

Due to this ongoing dependency, these nations and international creditors are imposing their conditions on Pakistan.

Prime Minister Shehbaz Sharif announced investment pledges of $15 billion from Saudi Arabia and the UAE, but these have yet to be formalized into agreements.

Failing to secure new debt from foreign commercial banks, the government has budgeted $3.9 billion in foreign commercial loans for the upcoming fiscal year. In the current year, China rolled over $1 billion of commercial debt.

The finance minister has not fulfilled his promise of issuing Panda bonds in the Chinese capital market. For the next fiscal year, the government has budgeted $1 billion in Eurobonds after failing to issue bonds this fiscal year.

There were expectations that international credit rating agencies would upgrade Pakistan’s junk rating under the $3 billion IMF standby arrangement. However, political and economic instability prevented an upgrade. Information Minister Marriyum Aurangzeb stated that rating agencies are awaiting approval of the new Extended Fund Facility from the IMF.

Without an improved rating, the government’s plan to raise $4.9 billion through Eurobonds and foreign commercial loans may not succeed. The government had anticipated receiving $6 billion from sovereign bonds and foreign commercial loans this fiscal year but failed to secure these deals, leading the State Bank of Pakistan to purchase an equivalent amount from local markets.

The government has again included the rollover of $5 billion in cash deposits from Saudi Arabia, highlighting the inability to repay the funds, of which $3 billion was borrowed in 2019 for one year.

However, Saudi Arabia has not agreed to extend a $1 billion oil facility to the next fiscal year, leading the government to exclude it from external loan projections. Similarly, no new Saudi loan for petrol imports is included, although the kingdom provided $600 million for petrol imports this year.

China’s $4 billion in cash deposits have been added to the rollover list, with $2 billion maturing next month.

The UAE’s financing is not part of the federal borrowing plan since it supports balance of payments and will be serviced by the central bank from its profits. Of the $3 billion, $1 billion is due next month.

The government also anticipates a new $500 million loan from the Islamic Development Bank and $465 million from Naya Pakistan Certificates. Approximately $1.1 billion will be borrowed to finance the federal Public Sector Development Programme.