EDITORIAL: In its monthly report on foreign assistance inflows, the Economic Affairs Division (EAD) revealed that the country received a total of 12 billion dollars in the first eight months of the current fiscal year, including 3 billion dollar rollover by Saudi Arabia, 2 billion dollar rollover by the United Arab Emirates and one billion dollar roll over by China, excluding the 2 billion dollar China rollover earlier this year.
Pakistan has an annual rollover portfolio of 12.7 billion dollars with net reserves at the State Bank of Pakistan of 11,097.9 million dollars as of 7 March 2025 or a shortfall of 1602.1 million dollars between the rollovers and the actual reserves.
Rollovers are approved by the three friendly countries for one year and if post-2019 IMF programme history is taken into account, extension of the rollovers is contingent on the country remaining on a Fund programme.
It is relevant to note that no staff level agreement (SLA) was reached on the first review of the 7 billion-dollar Extended Fund Facility (EFF) arrangement when the IMF team was in the country (24 February to 14 March 2025) with its end of mission statement ending on an optimistic note, notably, that “the mission and the authorities will continue policy discussions virtually to finalize these discussions over the coming days.”
However, the Finance Ministry officials told Business Recorder that the reason behind the deferral of the SLA was not failure to achieve the first review conditions/structural benchmarks but to ensure that the administration implements all second review agreed conditions as “prior” conditions due to the prevailing trust deficit. Be that as it may, EAD (economic affairs division) data, as is the accounting practice, excludes inflows from the IMF.
The government budgeted a total of 20.4 billion dollars as external assistance (rollovers, loans and grants) for 2024-25 at the then projected exchange rate of 278 rupees to one dollar or in rupee terms 5,685,801 million rupees against the 5,053,335 million rupees last year or 18.177 billion dollars (revised estimates).
It is relevant to note that the budgeted amount for last year was a whopping 7,169,136 million rupees or 25.7 billion dollars. In other words, the budgeted reliance on external inflows last year was 2,115,801 million rupees over-stated when considering the revised estimates that explains why the government had to continue to impose import restrictions as well as on repatriation of profits in defiance of the contracts signed with several foreign companies, including Independent Power Producers (IPPs) from China.
This year too, given the inflows for the first eight months, it is unlikely that the budgeted amount would be achieved; however, the extent of the shortfall would depend on the budget’s approval by the Fund team and the waiver, if any, granted to the revenue shortfall that has been revealed as 601 billion rupees during the first eight months of the current year.
The budgetary support envisaged from external sources for the current year was 278,777,550 million rupees; however, so far borrowing from commercial banks abroad (one billion dollars agreed with two Middle Eastern banks as stated by the Finance Minister end January this year) has not yet materialized and the issuance of Sukuk/Eurobonds has been delayed due to the prohibitively high rates of interest on offer due to Pakistan’s pretty low ratings.
Reports suggest that the current visit of the Prime Minister to Saudi Arabia is to get reconfirmation for the 100 million-dollar oil facility, which was pledged to resume this month; however, so far there have been no further details on the facility.
It is important to note that the country’s heavy reliance on external borrowing is partly justified as the country simply does not have the earnings to meet the interest/repayment of principal as and when due, which bring the threat of default that much nearer as previous administrations had borrowed heavily from abroad; however, the reliance on expensive foreign borrowing for budgetary and project support must end till such a time as our exports and remittances rise enough to meet a higher percentage of our foreign exchange requirements.
Copyright Business Recorder, 2025
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