Pakistan borrowed $2.3 billion in the last six months of 2018 and more than a third of it came from China, according to data released by the Economic Affairs Division.
Beijing lent us $835 million during the period under review (July to December 2018), which is 36% of our overall external borrowing and a far cry from what we borrowed from the US. The share of American loans in our foreign debt was less than 2%.
Among other major lenders, the Asian Development Bank and Islamic Development Bank were major sources of borrowing, contributing $339 million and $272 million respectively. But more than a fifth of our foreign loans came from commercial banks that lent us $500 million.
Pakistan is facing a double loss since its imports are more than twice its exports, which results in a trade loss, and it spends more than it earns, which creates an enormous budget deficit.
The trade loss we face is not sustainable because it drains our dollar reserves. In other words, we don’t have enough dollars to pay for essential imports that are necessary to support economic activity and meet other financial obligations, such as repaying our foreign loans.
On the local front, the government’s revenues are much lower than its expenses, leading to a budget deficit of more than Rs2 trillion. This leaves the government with no money of its own to spend on development, such as building schools, hospitals, roads and dams. To finance its budget deficit, Pakistan has been relying on domestic and foreign loans. Of our total external borrowing, $629 million was for budgetary support.
As of November, 2018, our national debt stands at Rs26,452 billion (Rs26.5 trillion) or $190 billion, which means every Pakistan owes more than Rs127,000. The total debt is now higher than the permissible limit, which should not exceed 60% of the GDP.