An agreement with the International Monetary Fund (IMF) is Pakistan’s only resort to obtaining funds as the global bond market and leading commercial banks have refused to offer support, reported Bloomberg.
Pakistan’s dollar bonds, which hit a record low earlier this month, rose on Friday after the government hiked fuel prices, partially fulfilling a major pre-condition for the IMF to continue its lending program. Pakistan also hopes to sign a staff-level agreement with the fund in June.
The previous government had put an artificial lid on fuel prices and had refused to increase them, which had indefinitely halted the IMF’s $6 billion bailout. Since Shehbaz Sharif and his allies assumed power on 11 April, the new coalition has barred luxury imports, and interest rates have been increased by the State Bank of Pakistan (SBP) to deal with the country’s surging import bill.
According to the Minister for Finance, Miftah Ismail, Pakistan requires funds in the range of $36-37 billion for the upcoming fiscal year beginning in June, and a deal with the global lender would help attract more investment from friendly countries like China, and institutions like the World Bank (WB).
While speaking at a virtual conference on Saturday, he remarked, “All roads lead to the IMF. Saudi Arabia and other nations are all eager to offer money, but they all say we must first go to the IMF.”
Miftah also ruled out raising money from the global bond market and foreign commercial banks, which until recent months, had provided short-term loans.
Other reports suggest that Pakistan has engaged JPMorgan Chase & Co., Citigroup Inc., Standard Chartered Plc, and Credit Suisse Group AG to oversee any bond sales. If successful, the funding will assist the country in increasing its foreign exchange reserves from around $10 billion to around $15 billion in the next fiscal year.
According to Bloomberg’s data, Pakistan faces a $3.2 billion debt due this year alone. Acting SBP Governor, Murtaza Syed, told investors and experts last week that if Pakistan gets the IMF program, the country’s financing needs will be met.