The incumbent government has received $4.6 billion foreign loans in the first five months of the current fiscal year. According to a monthly report by the Ministry of Economic Affairs (MEA), Pakistan has received an amount of $4.575 billion in loans and $125 million in grants. The government has a budgetary target to obtain about $14.1 billion in foreign loans and grants during FY21.
The total loan included $2.93 billion from the multilateral lenders like Asian Development Bank, World Bank, Islamic Development Bank, and others and foreign commercial banks including Dubai Bank, Standard Chartered Bank has disbursed about $1.53 billion. Bilateral lenders like China, the UK, Japan, Korea have also given loans to Pakistan.
The Government has borrowed these loans for infrastructure development, industrialisation, and social protection programmes to facilitate the post-pandemic economic recovery. Energy and power sectors were key priorities of these loan agreements.
However, excessive levels of foreign debt can hamper a country’s ability to invest in their economic future as limited revenues go to servicing their loans that resist the country’s economic growth. Poor debt management combined with the economic slowdown weakens the country’s currency which makes it even harder to service those debts. High levels of foreign loans have contributed to some of the worst economic crises including the devaluation of the rupee and the budget deficit that lead to inflationary monetary policies.
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