Pakistan is bankrupt in all but name.
From paying down the foreign debt to paying for fuel and even food, it is foreign loans that keep things running day to day.
While the country’s GDP is pegged at around $410 billion (around Rs 36.81 lakh crore), economic growth remains slow. Per capita income is low at $1,700 (Rs 1.53 lakh). Inflation, which hit a record high in 2023, remains at 6.1 per cent.
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The country is also burdened by public debt, which stands at around 70 to 80 per cent of its GDP. Foreign exchange reserves stand at around $15 billion (Rs 1.35 lakh crore). In this backdrop, it is foreign loans that are keeping Pakistan treading water.
But what do we know? How much is Pakistan relying on foreign lenders?
How foreign loans keep Pakistan afloat
As per data cited in Pakistani media, foreign assistance to Pakistan was over $3 billion (Rs 2.69 lakh crore) in the first few months of this financial year. This is a 14 per cent hike from the same period in the previous financial year, when foreign assistance stood at around $2.66 billion (Rs 2.39 lakh crore).
In the first quarter of this year alone, Pakistan received $1.82 billion (Rs 1.63 lakh crore) via foreign loans, grants and investments.
Most of this money isn’t being put towards building Pakistan. Instead, it goes to:
Servicing foreign debt
Boosting foreign exchange reserves
Paying for fuel, food and medicine
Which lenders are supporting Pakistan?
Pakistan got $807.64 million (Rs 0.73 lakh crore) in bilateral loans and grants, and $1.26 billion (Rs 1.13 lakh crore) in multilateral loans and grants. China contributed $119.77 million (Rs 0.11 lakh crore) in guaranteed loans, while Saudi Arabia provided $500 million (Rs 0.45 lakh crore).
Multilateral groups also helped out, with the Islamic Development Bank (IsDB) giving $383 million (Rs 0.34 lakh crore), and the
World Bank’s International Development Association (IDA) ponying up $343.15 million (Rs 0.31 lakh crore).
Pakistan also received $27.17 million (Rs 0.02 lakh crore) in bilateral grants, with support mainly from China, Japan and Saudi Arabia. Islamabad also received another $26.98 million (Rs 0.02 lakh crore) in multilateral grants from the IBRD and IDA.
Beijing gave Pakistan $4 billion (Rs 3.59 lakh crore) in term deposits to shore up its foreign reserves. Reuters
Saudi Arabia and China also gave Pakistan $9 billion (Rs 8.08 lakh crore) in term deposits, with the Kingdom handing over $5 billion (Rs 4.49 lakh crore) and Beijing making up the remaining $4 billion (Rs 3.59 lakh crore).
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Islamabad also received around $966 million (Rs 0.87 lakh crore) from Naya Pakistan Certificates from Pakistanis overseas. Multilateral grants are projected to hit $63.72 million (Rs 0.06 lakh crore), and loans are estimated to touch $5.04 billion (Rs 4.53 lakh crore) this financial year.
IMF at the heart of it all
Interestingly, the aforementioned figures do not include funds from the International Monetary Fund (IMF), which are placed in another column on the balance sheet of the State Bank of Pakistan.
The body recently approved $1.2 billion (Rs 1.08 lakh crore) for Islamabad — $1 billion (Rs 0.90 lakh crore) under its Extended Fund Facility and $200 million (Rs 0.18 lakh crore) under its Resilience and Sustainability Facility. The IMF has allotted $3.3 billion (Rs 2.96 lakh crore) for Pakistan under these two programmes alone.
Since 1958, the body has bailed out Pakistan nearly two dozen times, to the tune of tens of billions of dollars. Reuters
Nevertheless, Pakistan remains heavily indebted to the IMF. Since 1958, the body has bailed out Pakistan nearly two dozen times, to the tune of tens of billions of dollars.
The IMF also helped Pakistan avoid default in 2023. Pakistan secured a $7 billion (Rs 6.28 lakh crore) bailout programme from the IMF last year amid an economic crisis. It was also granted a new $1.3 billion (Rs 1.17 lakh crore) climate resilience loan in March.
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But the IMF gives Pakistan more than just cold, hard cash. Instead, it stands as a symbol for other lenders that Pakistan is creditworthy.
However, the IMF too has made demands of Pakistan in order to keep lending it money.
These include:
Pakistan, which is under pressure to comply with these diktats, is now trying to sell off its loss-making state companies.
For example, the government has now agreed to sell a majority interest in Pakistan International Airlines (PIA). The PIA, which was once one of the world’s top airlines, has been left in the red after years of mismanagement. The government has agreed to sell a majority stake in the national carrier for around $480 million (Rs 0.43 lakh crore).
Unfortunately, while this may raise quick cash, it leaves the bigger structural reforms unaddressed.
What do experts say?
They say the fundamentals of Pakistan’s economy remain unchanged. Pakistan’s exports remain few and its goods of low value, tax avoidance is rife, state energy firms face issues with theft and unpaid bills, and reforms are difficult to pass because of political instability.
As Bolormaa Amgaabazar, the World Bank’s country director for Pakistan, said, “Pakistan’s path to inclusive, sustainable growth requires mobilising more domestic resources and ensuring they are used efficiently and transparently to deliver results for people.”
Tobias Akhtar Haque, World Bank lead country economist for Pakistan, said strengthening Pakistan’s fiscal foundations was “essential to restoring macroeconomic stability, delivering results and strengthening institutions”.
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Experts say Pakistan cannot keep relying on the IMF in the long term and that a credible roadmap is needed. For now, Pakistan is surviving on foreign largesse.
With inputs from agencies
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