Policy makers focus on self sufficiency
The fast depleting flow of foreign financing into the economically embattled Pakistan is pushing the crises hit country against the wall, forcing policymakers in Islamabad to devise a pragmatic economic policy framework that is virtually based on self-sufficiency. The State Bank of Pakistan’ data shows that foreign lenders, during last three consecutive fiscal years have sizably reduced their short and long-term loans to Pakistan for one reason or another.
Foreign financing decreased by 39 percent
According to central bank figures, the last three fiscal years, have witnessed the flow of foreign financing in Pakistan contracting noticeably by 39 per cent or $1.445 billion to $2.245 billion against $3.690 billion the country had received in FY09. The inflows of finances on account of programme and project loans into the terrorism hit South Asian country have been witnessing a downward trend on a monthly, quarterly and yearly basis. The recently-concluded FY11 was no exception with foreign disbursements to Pakistan falling down by a massive 46 per cent to $2.245 billion. If compared with that of FY10’s $4.134 billion these figures depict a decrease of $1.889 billion.
Short term finances fall to ‘zero’
FY11 could, rather, be dubbed as the worst in terms of foreign financing since the country received “zero” financing from international money lending agencies under short-term loans that include commercial loans and disbursements from the Islamic Development Bank (IDB). The last short-term commercial loan Pakistan received from the IDB amounted to $570 million during FY10. However, during the year under review, the country received long-term loans worth $2.245 billion, 37 per cent or $1.319 billion less than $3.564 billion the country had been disbursed a year earlier in FY10.
Programme loans fall by 44.7 pc
In long-term finances, the government’s receipts under project and programme loans amounted to $856 million and $1.389 billion respectively. This if compared with previous year’s inflows of $1.048 billion and $2.516 billion shows a respective dip of 18 per cent and 44.7 per cent. On a quarterly basis, foreign financing into the country remained in the red zone with the second quarter of FY11 being the worst for Pakistan where it received only $276 million. The remaining three quarters, July-September 2010, January-March 2011 and April-June 2011, saw disbursements amounting, respectively to $623 million, $648 million and $698 million.
$472 million received from WB and ADB
SBP statistics for monthly disbursements reveal that the country had received $88 million during the month of May. While June, last month of the FY11, saw the transfer of $472 million under the $44 million project and $428 million programme loans. Much of the disbursements made in June, around $411 million, came from the World Bank and Asian Development Bank (ADB). The long-awaited release of finances from two international lending agencies, which had previously linked their credits to a Letter of Comfort (LoC) to be issued by the International Monetary Fund (IMF) in favour of a non-compliant Pakistan, helped the country’s foreign exchange reserves accumulate to an all time high level of $18.247 billion during the week ending on the 2nd of this month.
Record forex reserves cushion BoP woes
Whereas chances for an uninterrupted flow of foreign financing seem to be dim during the current fiscal year, however the economic managers in Pakistan would not be anticipating a recurrence of the 2008-like default on the Balance of Payment front by the country in the near future owing to the record dollar reserves Islamabad presently holds. Analysts, however, have persistently been warning against complacency asking economic managers to take effective measures to create an investment friendly environment in the violence-stricken country that, they believe, is the only sustainable remedy to Pakistan’s balance of payment woes.
