Pakistan has borrowed $3.1 billion in the past three months, including money for vaccine procurements, amid its requests to the International Monetary Fund (IMF) to relax the spending ceiling by around $2 billion for expenditures on mitigation of coronavirus disease.
The request for upward adjustment of the budget limit ceiling by around Rs352 billion or $2 billion is part of the fiscal adjusters that the government sought during recently held negotiations against the primary budget deficit target for the fiscal year 2021-22.
The government sought the relaxation for both the procurements of vaccines and other coronavirus-related mitigation measures, said the sources. They said that the IMF was seeking disclosure of terms of the vaccine procurements.
The discussions also held on the government’s request to also allow non-vaccine procurement expenditure outside the new primary deficit target, said the sources. It was not clear whether the IMF also agreed to book the non-vaccine procurement expenditure over and above the primary budget deficit target.
The fiscal consolidation remained the primary objective of the IMF during the third round of talks for the conclusion of the 6th policy review. The government faced difficulties in convincing the IMF to relax the ceiling for the COVID-19 spending and enhance the current sovereign guarantees limit of Rs2.7 trillion, according to the sources.
They said that the IMF wanted to instead reduce the sovereign guarantee’s ceiling and did not agree to give non-capital expenditures related guarantees, said the sources.
The Express Tribune contacted Secretary Finance Yusuf Khan, who is also the official spokesman of the Finance Ministry, for the version. However, he declined to give his version.
There seems to be some confusion within the Finance Ministry about who would talk to the media after hiring a spokesman for the former Finance Minister Shaukat Tarin.
Officially, the secretary of finance remains the spokesman. Neither the finance ministry nor the IMF has given any clarity about the outcomes of the 6th review talks, which according to the schedule should have been concluded by October 15th.
Under the $6 billion programme, the IMF sets an upper limit on the maximum government spending through various measures, mainly the primary budget deficit or surplus target. It allows relaxation or further tightens the target by upward and downward adjusting the ceiling through various adjusters like Covid-19 spending.
The IMF had set a condition to conduct an audit of $1.4 billion money that it had given for COVID-19 spending and make the report public by May 2021. But the Ministry of Finance has withheld the release of the report, giving rise to suspicion about any wrongdoing.
Meanwhile, the government has obtained $3.1 billion gross foreign loans during the July-September quarter of the fiscal year 2021-22, according to the Ministry of Economic Affairs. The borrowings were higher by $470 million or 17% compared with the loans taken during the same period of the last fiscal year.
The $3.1 billion worth of gross foreign loans is exclusive of the borrowing made through the highly expensive Naya Pakistan Certificates that is being secured at up to 7% interest rate in dollar terms for only one year.
The economic affairs ministry data showed that the government took another $145 million loan from the Asian Development Bank for procurement of vaccines.
About three-fourths of the officially declared disbursement or $2.3 billion were on account of budgetary support and oil procurements, which meant no asset was created using the loans and the money be paid back by obtaining more loans.
An amount of $457.5 million was received in foreign commercial loans during the first quarter. The government borrowed $61 million from Ajman Bank, $215 million from Dubai Bank and another $181 million from Standard Chartered Bank, London, according to the economic affairs ministry.
The government took $446 million in loans from the Islamic Development Bank for crude oil imports. The IDB crude oil-related disbursements remained low at only $33 million in September after its new trade finance facility could not be made operational.
The Asian Infrastructure Investment Bank released $38 million for project financing.
The bilateral loans disbursements remained quite low at only $110 million in the first quarter, including $73.4 million by China.
Amongst the multilateral development partners, mainly the Asian Development Bank (ADB) disbursed $460 million in loan during the first quarter, including money for vaccine procurements.
Due to increasing reliance on loans to increase the foreign exchange reserves and finance the budget deficit, the cost of debt servicing has gone up significantly. The steep rupee devaluation has also made the matters worse for the government, as the devaluation has already notionally added Rs1.6 trillion in the stock of external public debt level as of June this year.
The State Bank of Pakistan report revealed that during the first three years of its tenure, the Pakistan Tehreek-e-Insaf (PTI) government added Rs14.9 trillion to the public debt, which was 60% more than the debt stock in June 2018.
The World Bank released $642 million in three months, including a withheld loan of $400 million under the Programme for Affordable Clean Energy (PACE) after the government approved a new power generation expansion plan under the loan condition.
The total disbursements by the multilateral lenders amounted to $1.6 billion in three months as against the annual target of $5.3 billion, according to the Economic Affairs Ministry.