Pakistan is trying to get the remaining $2 billion in external financing to fulfill the highly contentious $6 billion funding target in order to restart its delayed bailout program with the International Monetary Fund (IMF), reported Bloomberg.
The Ministry of Finance (MoF) said in an emailed response that the country has assurances of $4 billion in funding and intends to reach an agreement with the IMF before releasing the budget for 2023-24 on Friday.
“Pakistan remains committed to completing the IMF program and has already demonstrated its seriousness,” MoF stated, adding that the government is willing to raise additional liquidity despite the considerable drop in the current account deficit which lowered the demand.
With the program frozen since 2022, the IMF’s external financing requirements and exchange-rate policy have largely impeded talks for an immediate bailout despite other and more austere measures to bring the economy back on track.
Pertinently, Saudi Arabia and the United Arab Emirates have assured $3 billion in funding, while China and its state-owned banks have extended credit pledges totaling $4 billion.
The IMF’s resident representative for Pakistan Esther Perez Ruiz said Monday that the lender will resume bailout once local authorities adhere to the Fund’s requirements in the upcoming budget and the Pakistani Rupee is “proper market functioning”.
Ruiz said talks between Pakistan and IMF are ongoing in order to pave the way for the Executive Board meeting before the current program expires.
According to Columbia Threadneedle Investments, the country faces $22 billion in foreign debt obligations next fiscal year, which begins in July. This is almost five times its reserves.
Patrick Curran, a senior economist at Tellimer based in Portland, Maine, said, “Pakistan will struggle to muddle through much longer without a program given its limited reserve buffers and elevated external financing needs. Default is inevitable if IMF support is not secured”.
More cash and the IMF loan are critical in overcoming the crisis, alleviating supply shortages, and pulling the economy out of default risk before elections later this year.
