ISLAMABAD - Pakistan has borrowed $12.178 billion loans from international sources during the first eight months (July-February) of the ongoing fiscal year to build its foreign exchange reserves, which are declining due to repayment against previous loans and financing current account deficit.

Pakistan received about $12.178 billion inflows, including $11.990 billion in loans and about $187.49 million in grants. The government has borrowed 86.4 percent of the annual loans target in just eight months to maintain its foreign exchange reserves that are depleting due to loan repayment and financing of current account deficit. The government has a budgetary target to obtain about $14.1 billion in foreign loans and grants during the current fiscal year. In February alone, Pakistan has taken foreign loan of $154.47 million from multiple financing sources. The total receipt of $12.178 billion constitutes $3.477 billion from multilateral, $203.68 million from bilateral, $2.623 billion from foreign commercial banks, and $2.041 billion from issuance of bonds and three billion dollars time deposit from Saudi Arabia.

According to a monthly report on foreign assistance released by the Ministry of Economic Affairs, Pakistan had borrowed $2.623 billion from foreign commercial banks during the first eight months of the current fiscal year. The breakup of commercial banks loans showed that country has taken $1.140 billion from Dubai Bank, $591.25 million from Emirates NBD, $487.26 million from SCB (London) including ($9.05 million in December), $61 million from Ajman Bank PJSC, and $343.50 million from Suisse AG, UBL and ABL.

Among multilateral development partners, mainly the Asian Development Bank provided $1.1 billion, the World Bank disbursed $1.034 billion, the AIIB $38.77 million, and IDB (S-Term) $1.189 billion. China disbursed 100.8 million dollar in first eight months (July-February) of the current fiscal year, the USA $49.67 million, Korea $4.06 million, the UK $14.54 million, and Germany $12.36 million.

The PTI government has taken total loan of about $46.358 billion since July 2018. Pakistan contracted $8.41 billion in FY2018-19, followed by $10.45 billion in FY2019-20, $15.32 billion n in FY2020-21 and $12.178 billion in first seven months of the FY2021-22.

The government is borrowing to build its foreign exchange reserves, which are declining due to the repayment of previous loans. The latest data of State Bank of Pakistan showed that country’s reserves had declined by $869 million week-on-week mainly for debt repayments dragged the foreign exchange reserves of the SBP. The reserves had declined to below the $15 billion mark for the first time in almost a year. The central bank on Thursday reported that its foreign exchange reserves in the week ending on March 18 plunged to $14.962b, which is the lowest level since April 2021 when forex holdings of the central bank stood at $15.598b. The SBP reserves in March 2021 were $13.493 billion. The government is facing pressure on the external sector, as foreign exchange reserves are continuously declining; current account deficit is widening and devaluation of the rupee against the dollar.