Karachi: The government has decided to borrow around USD 600 million from the Islamic Development Bank (IDB) to enable itself to pay back the first two instalments of ~ USD 400 million each due in Feb 24th and May 25th, 2012 out of the total payment of USD 7.6 billion to be repaid in three years.
According to Alfalah Securities Limited, as reported in the newspaper, the rate of interest would be as high as 6% as compared to prevailing rates in the global market where LIBOR is at 1.06% which would also increase the burden of debt financing on the economy.
Pakistan’s foreign exchanges reserves currently stand at USD 16.7 declining from above USD 18.0 billion from the beginning of FY12. The recent January trade deficit stood at USD 1.3 billion which was mostly offset by higher remittances of USD 1.11 billion in January alone. The total balance of goods, services and income reported a deficit of USD 1.73 billion and the financial account also stood at a deficit of USD 159 million in January, 2012. Therefore roughly Alfalah Securities Limited can expects the foreign exchange reserves would take a burden of USD 750 million every month to meet the balance of payment requirement in the absence of further foreign loans. Moreover an additional liability of USD 1.2 billion is due to be paid in FY12 in lieu of IMF stand by arrangement. Therefore, Alfalah Securities Limited believes that the economy is facing serious threats on the external front which may lead to steeper devaluation of Pak Rupee where Alfalah Securities Limited expects the currency to devalue by 8% in FY12.