Pakistan loans: Pakistan, which is facing a deep economic crisis, is now drowning under mounting debt from various countries and financial institutions such as the World Bank and IMF, and may not be able to repay its creditors for years to come, which is likely to sink the Pakistan economy further down the drain.
How much does Pakistan owe?
According to economists, Pakistan is caught in a vicious debt trap as it is forced to take fresh loans to repay old one, and the cycle continues because the Pakistan economy lies in shambles and is unable to generate any significant revenue of its own. In the last fiscal, Pakistan borrowed a record $26.7 billion in foreign loans, at least half of which was allocated to refinance existing borrowings.
Pakistan has borrowed stupendous amounts of money from ally nations like Saudi Arabia, China, UAE and Kuwait, apart from hefty loans from global financial bodies like the IMF and the World Bank.
As per reports, Saudi Arabia deposited a cash amount of $5 billion in Pakistan Central Bank at an interest of 4%, and if the loan will roll over annually if Islamabad fails to repay it. China, Pakistan’s “all-weather” ally, has loaned $4 billion to Islamabad at 6% interest, while UAE has deposited $3 billion in the Central Bank of Pakistan.
What interest is Pakistan paying on these loans?
According to data, Pakistan has borrowed a total of $6.9 billion from various institutions, including $2.1 billion from the Asian Development Bank (ADB), $1.7 billion from the World Bank. The Islamic Development Bank has given a funding of $716 million to Pakistan, while Saudi Arabia has provided $200 million under an oil financing arrangement with a 6% interest.
Notably, Pakistan was unable to access the international capital markets last year due to poor financial condition, and could not raise the $1 billion it planned to using Eurobonds and Panda bonds.
Pakistan’s foreign exchange reserves stood at $14.5 billion at the end of June, a major portion of which is refinanced loans, rollover and new loans.
Why IMF, World Bank may shun Pakistan?
Pakistan’s mounting debt crisis means the country has a poor credit rating and global institutions like the IMF and the World Bank might not come to the rescue if Islamabad’s economic situation worsens or remains stagnant. The poor credit rating is also the reason why Pakistan has to pay huge interest on commercial loans and cash deposits.
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