Pakistan's dollar inflows fall by 30% despite IMF's $1.16bn tranche

• Pakistan has been facing dollar liquidity crunch, sources say. 
• Pakistan obtains $682.3m in first quarter of current fiscal year. 
• It obtained $1.04bn in first quarter of last fiscal year.

Pakistan's dollar inflows, in the shape of loans and grants, took a fall by 30% to $2.23 billion in the first quarter (July-September) of the current fiscal year despite getting a $1.16 billion tranche from the International Monetary Fund (IMF).

In the first quarter of the last financial year, Pakistan received $3.2 billion as loans and grants. 

“It demonstrates that Pakistan has been facing dollar liquidity crunch as its ability to generate dollars eroded with the passage of time mainly because of the worsening macroeconomic situation,” top official sources said while talking to The News on Friday.

Pakistan is unable to generate dollar inflows in the shape of launching international bonds and securing commercial loans in this fiscal year's first quarter so far.

In the first quarter of the last fiscal year, Pakistan obtained $1.04 billion through the launch of international bonds and secured commercial loans of $457.5 million. But in this fiscal year, so far, not a single penny could be obtained in these two heads. Pakistan’s bond yield has gone up manifold and so, Islamabad does not consider launching any international bond.

The Ministry of Finance did not prefer to go ahead with commercial borrowing in the current fiscal despite projecting $7.4 billion in loans planned, generated through commercial loans for the whole financial year 2022-23.

However, there is good news coming from Manila as the Asian Development Bank's (ADB) Board has approved $1.5 billion loans for Pakistan, while the Asian Infrastructure Investment Bank (AIIB) would also approve co-financing of $500 million next month. It was linked with the approval of ADB. 

The approved loan of $1.5 billion will be disbursed next week and Islamabad would be in a better position to pay back the $1 billion bond on December 5, 2022, upon its maturity without fear of further depletion of foreign currency reserves.

The foreign currency reserves held by the State Bank of Pakistan (SBP) stood at $7.5 billion on October 14, 2022, compared to $10.8 billion when the PDM-led government came into power after a no-confidence vote against Imran Khan in April 2022.

According to the official data on external loans, Pakistan has obtained $682.3 million from multilateral creditors in the first quarter of the current fiscal year against $1.595 billion in the same period of the last financial year.

The World Bank became the largest borrower among the multilateral creditors with disbursements of $416.49 million as International Development Association (IDA) funding was made which provided $28.9 million as International Bank for Reconstruction and Development (IBRD) loans.

The ADB, so far, disbursed $112.73 million in the first quarter of the current fiscal year. The AIIB disbursed $4.45 million, Islamic Development Bank (IDB) $11.5 million, IDB $101 million, IFAD $6.24 million and World Bank’s Multi-Donor Trust Fund (MDTF) $1 million.

The funding from bilateral donors has gone up as it stands at $385.99 million in the first quarter of the current fiscal year against $110.4 million disbursed in the same period of the last financial year.

The financial assistance from bilateral donors increased manifold mainly because of Saudi Arabia’s help in the shape of an oil facility on deferred payment. Saudi Arabia, so far, provided $300 million oil facility on deferred payment in the first three months of the current fiscal year.

China is second as it provided $54.93 million in financial assistance in the first months of the current fiscal year. France disbursed $4.44 million, Germany $0.33 million, Japan $0.68 million and the US $9.95 million.