$1.315 billion borrowed from foreign banks

In a bid to keep foreign currency reserves at a historic high, the federal government has borrowed $1.315 billion from foreign commercial banks in the current financial year (July-April) 2016-17. The government has budgeted $2.005 billion from foreign commercial banks for the current financial year 2016-17. According to official data the government borrowed $300 million from Industrial and Commercial Bank of China Limited in the current fiscal year (July-April) 2016-17.
Ministry of Finance has finalised arrangements for $600 million commercial loan from two Chinese banks to be utilised for balance of payments and budgetary support and received $300 million in January. Further, the country borrowed $200 million from Noor Bank PJSC for budgetary support and $700 million from China Development Bank as non-project aid during the month of September. The government borrowed $115 million additional in the month of March from Noor Bank PJSC for budgetary support, bringing the borrowing from foreign commercial banks to $1.315 billion in the current financial year. In addition, the government issued Sukuk of one billion dollars at 6.5 percent rate of return during the period under review. The government has also borrowed $19 million from Asian Infrastructure Investment Bank (AIIB) in the current financial year which was not budgeted as per the Economic Affairs Division (EAD) data. The data shows that government borrowed $5 million from the Eco Trade Bank in the month of February which was not also budgeted.
Islamic Development Bank (IDB) has released $63.47 million in the current fiscal year against the budgeted $18.82 million. Moody''s Investors Service has predicted that Pakistan''s external debt will grow to $79 billion by June this year, which is much higher than initial estimates. The country''s weak fiscal strength will weigh in on its ability to afford the ever growing debt burden.
In its latest report, the international credit rating agency said that Pakistan''s challenges include a relatively high general government debt burden, weak physical and social infrastructure, a fragile external payments position and high political risk. Moody''s assessed Pakistan''s fiscal strength at negative "(-) Very Low", which it said was hindering debt affordability and increases the debt burden. It said Pakistan''s limited tax base restricts its fiscal space, while low savings and shallow capital markets hinder stable domestic financing of sizeable budget deficits.