Shattering the previous record of 10.45 billion US dollars, Pakistan took out 15.32 billion US dollars in new foreign loans in the fiscal year 2020-21, according to a new government report.
According to The Express Tribune, the report shows that the incumbent government has almost doubled Pakistan’s external debt in just three years, adding 35.1 billion US dollars to take the total figure to an astonishing 85.6 billion US dollars.
The report issued by the Ministry of Economic Affairs stated that new debt was added “to mitigate the pressure on the current account deficit, strengthen foreign exchange reserves, enhance external debt servicing capacity and provide requisite financing to water sector development”, as per The Express Tribune.
The newspaper also reported that the heavy borrowing to shore up the current account deficit has already begun drying up.
It is highly likely that we will see another year of record borrowing to reduce the stress on the current account caused by the massive import bill.
In September, the finance ministry said that 2.9 trillion Pakistani rupees of the increase in total public debt was due to the devaluation of the currency.
The Pakistani rupee has recently depreciated 30.5 per cent against the US dollar in the last three years and four months under the current government of Pakistan Prime Minister Imran Khan.
According to The News International, the value of the Pakistani rupee has fallen from ₹123 against the USD in August 2018 to ₹177 against the USD in December 2021, a decline of 30.5 per cent over the last 40 months. This makes it one of the highest devaluations of the currency in the country’s history.
Notably, the only other higher devaluation occurred following the falling of Dhaka and Pakistan’s currency was devalued by 58 per cent from ₹4.60 to ₹11.10 against the USD in 1971-72.
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