In its last-ditch effort to revive the International Monetary Fund’s (IMF) stalled debt, Pakistan has sought $2 billion in external financing to cover the $6 billion gap to restart the bailout program.
The finance ministry said in an email that the government has secured $4 billion in external financing and hopes to reach a deal with the Washington-based lender before the budget is unveiled this Friday.
The government remains on tenterhooks, with an increasing urgency to restart the $6.7 billion program – signed in 2019 and due to expire in June this year – with external financing and the exchange rate among the biggest hurdles.
Due to differences between local authorities and the lender, the ninth review has been stalled for more than six months, one of the longest delays for a review.
“Pakistan is committed to completing the IMF program and has already demonstrated its seriousness,” the ministry said.
The ministry added that it is committed to mobilizing additional liquidity despite a significant reduction in the current account deficit, which has led to a reduction in demand.
Saudi Arabia and the United Arab Emirates have pledged to provide $3 billion in new financial aid to Pakistan. China and its state-owned banks have added more than $4 billion in loan commitments.
In an email, the IMF’s resident representative for Pakistan, Esther Perez Ruiz, said that while the authorities will adhere to the lender’s program goals, provide adequate financing when presenting the budget, and the Pakistani rupee. The program will be restarted once “adequate market performance” is achieved.
“IMF staff continues to engage with Pakistani authorities to pave the way for a board meeting before the current program expires,” the official said.
According to Columbia Threadneedle Investments, the South Asian country has to pay off about $22 billion in external debt over the next fiscal year, which is more than five times its foreign exchange reserves.
The coalition government has taken a number of steps to meet the IMF’s demands – including raising taxes, raising energy prices, and allowing the rupee to weaken against the dollar.
Once the IMF loan comes through, it will allow Pakistan to unlock more financing from other multilaterals.
The funds will help the $350 billion economy overcome a dollar shortage, ease supply shortages, and bring the South Asian nation out of default risks ahead of elections – due later this year. There are
