Pakistan’s external debts swell to $62b despite increased domestic loans

Pakistan’s total foreign debts and liabilities have aggregated to $62 billion by 30th September this year, central bank reported. This is despite government’s exorbitant budgetary borrowings from local banking system that ballooned to Rs719.726 billion during July-Nov 11 FY12 compared to Rs304.802 billion of corresponding period in FY11. Ever since inflow of foreign financing, particularly that of IMF under 2008’s $11.3 billion Stand-By Arrangement (SBA), started depleting to an alarming level, the floods- and terrorism-stricken government shifted its borrowing focus to domestic sources. According to State Bank data, resource-constrained Pakistan’s external debts and liabilities rose by 2.6 per cent or $1.59 billion to $61.835 billion. Cash-strapped country owed $60.236 billion to international lenders by same date last year in 2010.
Apparent reason for increasing foreign debts is funds-starved government’s skyrocketing public debts that, SBP figures for review period show, escalated to $57.586 billion, up by $1.25 billion compared to last year’s 56.33 billion. Of total public debts, loans secured and used by government accounted for $46.372 billion against $44.786 billion of last year. This shows an increase of $1.58 billion or 3.5 per cent. Credits from the International Monetary Fund (IMF) were among the few accounts that were set in the red zone and contracted by 2.6 per cent to $8.670 billion compared to 2010’s $8.908 billion. Government’s foreign exchange liabilities, including central bank’s deposits, foreign currency bonds, etc shrank to $2.544 billion from last year’s $2.638 billion. Whereas government’s medium and long-term loans from Paris Club, Saudi Arabia, China and other multilateral and bilateral lenders ballooned to $45.805 billion. Its short-term loans from Islamic Development Bank (IDB) declined from $567 million against $880 million of last year.
Public Sector Enterprises (PSE) guaranteed debts increased by $35 million to $186 million compared to $151 million of 2010. While loss-making PSE’s non-guaranteed debts remained downward by $147 million at $926 million compared to $1.073 billion previously. Government borrowings from scheduled banks witnessed an astronomical trend and swelled by 163.4 per cent or $402 million to $648 million compared to $246 million previously. While government’s private guaranteed debt reduced to zero, its private non-guaranteed debts rose by $55 million to $2.365 billion from $2.310 billion. Private non-guaranteed bonds, however, remained static at $124 million. Government’s official liquid reserves, which include sinking funds and cash foreign currency, increased to $14.668 billion against $13.386 billion during the period under review.
With its external debts peaking to new highs and foreign financing shrinking to an alarming level, country’s economic managers are comforted by foreign exchange reserves that are fast declining and now stand at $16.9 billion. During first four months of FY12, country’s current account deficit has widened to $1.5 billion compared to $ 541 million of previous year.