I have been regularly writing
fact-based columns on important national economic issues for the last 22 years
to provide economic facts to readers who are worried about the economic
downturn, inflation, unemployment, rising prices of electricity, gas and petroleum
products. Let me know. Recently, the Federal Secretary of the Ministry of
Economic Affairs, Dr. Kazim Niaz gave a presentation to other members of the
Standing Committee on Economic Affairs of the National Assembly, including me,
at the Parliament House, which showed how far Pakistan is stuck in the mire of
debt and now the country Deputy Prime Minister Ishaq Dar and Finance Minister
Muhammad Aurangzeb visited China with their economic team to save China from
default and defer China's loans for 5 years.
In order to approve the IMF
program, Pakistan has to reschedule the payments of 27 billion dollars of loans
this year, which includes the loans of 4 billion dollars from China, 5 billion
dollars from Saudi Arabia and 3 billion dollars from the United Arab Emirates
for a total of 12 billion dollars. which have to be postponed for 3 to 5 years
and these countries have to confirm the rescheduling before the approval of the
IMF Board. Apart from this, China's $15.36 billion IPPs' outstanding loans are
also to be deferred for 5 years, which will increase the interest bill by more
than $1 billion. These loans do not include 480 billion rupees revolving loans
of Chinese IPPs in Pakistan. China has rolled over the $2 billion safe deposit
for one year in March this year. Apart from this, EXIM Bank of China has also
rolled over the principal amount of 32 loans of 1.2 billion dollars for 2023-24
and 1.2 billion dollars for 2024-25 for 2 years, but Pakistan will have to pay
additional amount of interest to EXIM Bank on these loans.
Readers! More than 30 percent of
Pakistan's external debt of $130 billion is owed to China, including $23
billion from the Chinese government and $7 billion from Chinese commercial
banks. There are three types of loans taken from China. One is taken for cpec,
second is from Chinese commercial banks and the third is safe deposits of China
kept in State Bank of Pakistan which has to be repeatedly requested to roll
over from China. IMF's condition is that its loans should not be used to repay
Cpec's debts. China has provided $5 billion in equity financing in 21 energy
IPPs projects in Pakistan, while the remaining Chinese banks have debt with a
10 to 15-year term that has matured or is about to be repaid.
Chinese banks are pressuring Pakistan to repay the loans of their IPPs, but considering the limited foreign exchange reserves, Finance Minister Muhammad Aurangzeb has requested these banks to defer the loans for 5 years. According to the Ministry of Economic Affairs, the external public debt of Pakistan is 86.286 billion dollars in the total debt of 130 billion dollars by May 2024, in which 38.4 billion dollars of the World Bank, Asian Development Bank, Islamic Development Bank and UADP are multilateral, China, Saudi Arabia and UAE. EK includes $16.4 billion bilateral, $8.6 billion imf, $6.8 billion government bonds, $5.6 billion commercial loans, $4 billion China safe deposits and $5 billion time deposits, while there are $44 billion government guarantees. Regrettably, these external loans are not project loans but have been acquired for budget deficit and external debt repayments.
There is no problem in taking external loans, if these loans are taken at
subsidized interest rates for long-term major development projects to be repaid
from the proceeds of the same projects, of which projects like Mir Bhasha and
Dasu Dams are notable. Efforts are being made to obtain loans from the Arab
Coordination Group and Qatar Funds for Development for the Mir Bhasha Dam,
while one billion dollars is likely to be received from the World Bank for the
Dasu Hydro Project. Saudi Arabia had given us an oil loan facility of one
billion dollars which has lapsed and Saudi Arabia is not renewing this
facility.
In January 2023, at the Geneva
Donors Conference, Pakistan was promised 10.7 billion dollars for the
rehabilitation of the flood victims, but out of this, Pakistan has received
only 3 billion dollars, which is in the form of loans instead of grants. I asked
the Secretary Economic Affairs in the Standing Committee meeting that according
to the Fiscal Responsibility and Debt Limitation Act 2005 in Pakistan, we can
borrow a maximum of 60% of GDP, but by June 2024, our debt will be 67.5%. It
has reached 1 trillion rupees which is 74.3% of the GDP. The government had
promised to bring it down to 50% of GDP by 2033, but on the contrary, the debt
is increasing and the repayments are exceeding our income and there is no doubt
that Pakistan is in the clutches of debt. The government has to make a
comprehensive strategy to get out of it.
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