*ISLAMABAD – Pakistan borrowed $10.7 billion in the 2017-18 fiscal year.*
Chinese commercial banks lent Pakistan $2.2 billion in the fiscal year thatended in June 2018. These include the Bank of China, China Development Bankand Industrial and Commercial Bank of China.
In the past fiscal year, Pakistan raised $2.5 billion through bonds and$4.14 billion from foreign commercial banks. Multilateral donors, like theAsian Development Bank, Islamic Development Bank and International Bank forReconstruction and Development, lent Islamabad $3.8 billion. The countryalso borrowed $254 million from bilateral donors or friendly countries likeChina, France, Japan and Kuwait.
More than 60% of the money Pakistan borrowed last year was meant to keepthe country’s foreign exchange reserves high enough that it could avoidbankruptcy or default on previous loans and pay for essential imports.
Pakistan is facing a trade gap or deficit of $18 billion a year because itsimports are much higher than its exports. This is not sustainable becauseits current dollar reserves ($10.2 billion) are not enough to pay foressential imports that are necessary to support economic activity.
On the local front, the government’s revenue, that mainly comes from taxes,is much lower than its expenses, which results in a budget deficit. In the2017-18 fiscal year, its expenses exceeded its revenue by Rs2.12 trillion,leaving the government with no money of its own to spend on development.
To finance this trade gap and budget deficit, Pakistan has been relying ondomestic and foreign loans. The country’s total national debt stands atRs28 trillion or $234 billion, of which foreign loans make up $90 billion.This is higher than the permissible limit, which should not exceed 60% ofthe GDP.