The International Monetary Fund (IMF) has projected Pakistan’s gross external financing needs at $30.757 billion for the fiscal year 2022-23, which is 8.8 percent of GDP.
The IMF, in its report, titled, “Seventh and Eighth reviews under the extended arrangement under the extended fund facility, requests for waivers of nonobservance of performance criteria, and extension, augmentation, and rephasing of access,” has projected Pakistan’s gross external financing needs at $36.621 billion for 2023-24, i.e., 9.2 percent of GDP and $35.717 billion for 2024-25, i.e., 8.4 percent of GDP.
The report noted that financing commitments from bilateral and multilateral partners will help cover public gross external financing needs in the fiscal year 2023 and until the newly proposed end of the program in June 2023. Nonetheless, financing risks remain exceptionally high arising from large public sector external rollover needs, the still sizable current account deficit, the difficult external environment for Eurobond issuance given recent downgrades and high spreads, and limited reserve buffers to help cover the financing needs in case of delays in scheduled inflows. Firm commitments of full program financing are in place for the next 12 months.
The authorities continued engaging external creditors to secure financing to meet the program’s debt sustainability objectives. In late 2021, the authorities secured a $3 billion loan from Saudi Arabia that relieved financing pressures and a deferred oil financing facility ($1.2 billion) that became operational in FY22Q3.
China has maintained its exposure by renewing (and augmenting) the $4.5 billion swap agreement ($3 billion at the time of EFF approval), as well as by renewing maturing commercial loans, though some at shorter maturity and with delays in the roll-over process, creating uncertainty in the marketplace. Moreover, the deposits through China’s State Administration of Foreign Exchange stand at $4 billion. Nonetheless, near-term financing risks remain elevated, reflecting the large size of public sector amortization needs. To ensure that external financing needs are covered the authorities are seeking additional financial support from their traditional bilateral partners.
Pakistani authorities informed the Fund that they secured adequate long-term financing from our international partners to support our economic reform program. Current projections suggest that with the policies outlined in this MEFP, the gross external financing needs for FY23 will amount to approximately $33 billion (including the current account), of which, about $22 billion is amortization to multilateral and bilateral official as well as commercial creditors.
To close this gap, we have secured $7 billion as rollovers of existing and $4 billion in additional financing commitments from bilateral, multilateral, and commercial partners. In line with program financing commitments, key bilateral creditors have at least maintained their exposure to Pakistan, it added.
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