Pakistan government falls short of loan target in July

Awaiting the approval of a USD 7 billion bailout from the IMF’s executive board, the Shahbaz Sharif government faced a weak start by securing just USD 436.4 million in foreign assistance and grants in July, nearly 85 percent less than the amount received in the same month last year, Dawn News reported.

The USD 426 million in foreign loans and USD 10.5 million in grants during the first month of the current fiscal year seem insignificant against the ambitious USD 19.4 billion target for foreign assistance set for FY25.

In July last year, Pakistan received over USD 2.89 billion, largely due to the signing of the 9-month $3 billion Stand-By Arrangement (SBA) with the IMF, which enabled Pakistan to secure a significant USD 2 billion time deposit from Saudi Arabia. Total inflows in July 2023 reached USD 5.1 billion, including USD 1.2 billion from the IMF and another USD 1 billion from the UAE.

On Tuesday, the Ministry of Economic Affairs reported receiving USD 436.39 million in total foreign inflows, compared to USD 2.89 billion in the same month last year. The Economic Affairs Division (EAD) highlighted that the majority–USD 307 million–came from project financing, a 52% decline from the USD 640 million received in July last year, reported Dawn News.

Against a full-year target of USD 4.53 billion from multilateral lending agencies (excluding the IMF), Pakistan secured USD 201 million in July, slightly more than the USD 194 million received in July last year when the yearly target was USD 5.34 billion.

In 2022-23, the government had set a budget for USD 22.8 billion in foreign assistance but only managed to secure USD 10.8 billion–just 46 percent of the target–due to the suspension of the IMF program, leading to an USD 11.8 billion shortfall and a consequent depletion of foreign exchange reserves.