Pakistan received USD 5.1bn in foreign loans in first five months of current fiscal
Dec 24, 2022
Islamabad [Pakistan], December 24 : Cash-strapped Pakistan borrowed about USD 5.115 billion in foreign loans in the first five months (July-November) of the current fiscal year, Pakistan's Dawn newspaper reported on Saturday.
The Pakistani publication said this increase is almost 14 per cent higher than the foreign loans it received in the comparable period last year.
Pakistan's Ministry of Economic Affairs (MEA) said it received about USD 5.115 billion in foreign assistance in 5MFY23 compared to USD 4.499 billion in the same period last year.
The total inflows at USD 5.115 billion in 5MFY23 amounted to just 22.4 per cent of the budget estimates of USD 22.817 billion for the entire year, the Dawn report said.
The inflows of USD 4.5 billion in 5MFY22 accounted for 37 of the annual budget estimates of USD 12.233 billion. The Ministry of Economic Affairs reported the full fiscal year 2021-22 foreign economic assistance at USD 16.975 billion.
This comes as Pakistan's economy underwent an overdue adjustment in early FY23, as it recovered from the impacts of COVID-19, according to World Bank. Supported by accommodative macroeconomic policies, the economy expanded by 6 per cent in FY22.
Strong domestic demand, low productivity growth, high world commodity prices, and the global economic slowdown contributed to severe external imbalances.
In a bid to stabilize the economy, the Pakistan government began implementing a range of policies to constrain aggregate demand, including a contractionary budget and increases in administered energy prices, according to World Bank.
As a result of stabilization measures, growth was expected to slow, the exchange rate was expected to stabilize, total public debt was expected to decline gradually from current high levels, and foreign exchange reserves were expected to accumulate slowly.
Recent floods have had enormous human and economic impacts. Pakistan has been experiencing heavy monsoon rains since June 2022 leading to catastrophic and unprecedented flooding.
Economic impacts are concentrated in the agricultural sector, with over 9.4 million acres of cultivated land destroyed, resulting in significant losses to cotton, date, wheat, and rice crops.
The economic impacts of flooding are likely to delay much-needed economic adjustment. Growth is now expected to reach only around 2 per cent in FY23.
