KARACHI: The government plans to borrow Rs211.5 billion through commercial banks in the next fiscal year out of the total Rs807bn earmarked as external sources for loans and grants for the Public Sector Development Programme (PSDP).
During the outgoing fiscal year, the government planned to borrow Rs20.25bn through a consortium of commercial banks but it ended up raising Rs102.6bn, according to revised data.
Budget documents for the upcoming fiscal year reveal that the government will also raise Rs105.5bn (around $1bn) through sovereign bonds. Since the amount has been shown as external sources, the bonds would be floated in the international market.
During FY16, Pakistan issued a 10-year bond of $500 million in the international Eurobond market at a coupon rate of 8.25 per cent. Not only the rate became controversial as it was very high as compared to other papers available in the market, the response was also disappointing as it remained much below the expectations of the country’s economic managers.
The government also plans to raise Rs79bn (around $750m) through Islamic bonds, or sukuk, during the upcoming fiscal year. In November 2014, Pakistan raised $1bn from international debt markets through the issuance of five-year dollar-denominated sukuk.
As part of the external sources, Pakistan would borrow Rs59.6bn from China. In the last fiscal year, the government targeted Rs85.9bn borrowing in the budget but reached Rs142.9bn at the end of the fiscal year.
Similarly, the government showed Rs92bn from the Asian Development Bank in FY16 but concluded with a much higher revised amount of Rs124.8bn. During the upcoming fiscal year, the government has decided to borrow Rs104.5bn from the Asian lender.
As external sources, the budget documents showed that the second-largest amount of Rs150bn would be raised through International Development Association (IDA). Last year, an amount of Rs166.5bn was to be borrowed from the IDA, but the actual borrowing touched Rs172.6bn at the end of the fiscal year.
The Islamic Development Bank (IDB) will provide Rs49.6bn in FY17. The amount was much lower than the amount marked in the last year’s budget. The government wanted to raise Rs127.4bn from the IDB, but it could receive about Rs104.8bn by the yearend.
The summary of external loans showed that the government is willing to raise R807bn as loans and grants for FY17 compared to revised estimates of Rs823bn for FY16. The government was willing to raise Rs751.5bn during the preceding fiscal year.
Of the Rs807bn, the government expects to receive Rs12.6bn as grants while the rests are loans. It seems that the entire amount needed for the PSDP would be arranged through external borrowing. If the external borrowing could not be arranged as per the target, the PSDP would face a cut. During the first three years of this government, about Rs800bn was collectively slashed from the PSDP.
These big reductions the development spending badly hamper the growth rate, which could hardly reach 4.7pc in FY16 and is targeted at 5.7pc in the upcoming fiscal year.
Courtesy : Dawn News