Pakistan's dollar inflows climb to 9.27b mark in first half of FY22

• Pakistan receives loans worth $4.525bn and major portion of $3bn from Saudi Arabia in December 2021.
• Despite generous dollar inflows, Pakistan's forex reserves continue to decline.
• Sudden jump of $4.525bn in December 2021 pushes dollar inflows up to $9.2 billion in first half of FY22.

ISLAMABAD: After Pakistan received a significant tranche of a $3 billion loan from Saudi Arabia in December 2021, the country's dollar inflows climbed to $9.27 billion in the first six months (July-Dec) of the current fiscal year, The News reported.

Pakistan received $4.525 billion in dollar inflows in the form of loans and a significant portion of $3 billion from Saudi Arabia on account of time deposits, all in the month of December 2021 alone.

Nevertheless, the country’s foreign exchange reserves held by the State Bank of Pakistan (SBP) continued to drop. As of January 14, Pakistan's total liquid foreign reserves stood at US$23.34 billion, while the foreign exchange reserves held by the SBP stood at $17.035 billion and net reserves held by the commercial banks at $6.314 billion.

By the end of the week on January 14, the SBP reserves dropped by $562 million to $17.035 billion owing to the external debt and other payments.

In August 2021, the foreign exchange reserves held by the SBP stood at over $20 billion but despite dollar inflows from Saudi Arabia and the IMF to the tune of around $5 billion, the reserves still decreased by over $3 billion.

Earlier, in the first five months (July-Nov) period, total dollar inflows stood at $4.699 billion, so a sudden jump of $4.525 billion in December 2021 pushed up dollar inflows to the tune of $9.2 billion in the first six months of the current fiscal year.

Owing to the stalled IMF program, Islamabad is continuously relying upon mustering up dollar inflows through commercial loans from banks. Official data on foreign loans and grants showed that China provided bilateral guaranteed loans of $291.5 million in the first six months of the current fiscal year.

The commercial banks (NBP Bahrain) and others provided $301.522 million in the July-Dec period of the fiscal year 2021-22.

Total bilateral loans and grants from different friendly countries provided financing of $150.193 million in the first six months of the current fiscal year out of which China provided $74.5 million, France $6.87 million, Germany $12.07 million, Japan $5.151 million, Korea $3.22 million, Saudi Arabia $1,092,000, UK $14.537 million and the USA $32.60 million.

Pakistan had generated $1.04 billion through the launching of Eurobond in the first six months of the current fiscal year. Islamabad launched the Eurobond for raising over $1 billion in July 2021. Now the PTI government has recently launched another international Islamic bond known as Sukuk at the highest-ever rate of 7.95 percent in January 2022, so this amount of $1 billion will be reflected in the data of official dollar inflows next month.

The commercial banks provided loans to the tune of $2.031 billion during the first half of the current fiscal year as Ajman Bank provided a commercial loan of $61,000,000, Dubai Bank $1.14 billion, SCBL (London) $487.255 million and SUISSE, AG, UBL and ABL consortium provided a loan of $343 million. In December 2021, the commercial banks provided loans of $502.054 million to Pakistan for meeting its financing requirements.

The multilateral creditors provided loans to the tune of $2.9 billion in first six months of the current fiscal year, out of which ADB disbursed total loans of $1.06 billion, AIIB $37.7 million, EU $22.55 million, World Bank’s IBRD loan of $158.7 million, WB’s IDA funding of $807.034 million, IDB $4.308 million, IDB (short term) $800.686 million and IFAD $13.964 million.