The International Monetary Fund (IMF) has requested additional information from Islamabad on the budget and other areas before starting virtual talks, the country’s $10 billion foreign debt for the remainder of the current fiscal year. To prevent default in the midst of urgent need.
“Remaining debt repayment requirements and managing a current account deficit of $8 to $10 billion cannot be lifted without the support and maintenance of the IMF program, withholding external financing,” a government official said. said When contacted, a senior official of the finance division said that the IMF has sought some additional information and that they are sitting in the finance ministry tonight to respond to the IMF.
Meanwhile, the government is all set to present its plan to eliminate the revolving debt of the gas sector before the upcoming federal cabinet meeting, including increasing gas tariffs and meeting the IMF’s condition. Changes will be made in the existing syllabus.
Earlier, Pakistan shared the contours of the regions to meet the pending 9th review under the $7 billion Expanded Fund Facility (EFF). The IMF has now asked for more details on the budget position, which will soon be shared with the global lender.
On the other hand, the near-term challenge for Pakistan has increased sharply as Islamabad has to secure $10 billion in new loans in the remaining five months (February-June) to avoid default. Against this backdrop, the government sent an SOS (Save Over Soul) to the IMF to revive the stalled program since last November. Since then the country has been on a slippery slope to the brink of total economic collapse.
The State Bank of Pakistan (SBP) has acknowledged in its latest monetary policy that near-term challenges for the external sector have increased despite the policy-driven contraction in the current account deficit during the first half of FY23. “Fresh loan requirements of $8-10 billion cannot be managed without the blessing of the IMF’s recovery programme,” sources told JEE News on Monday, citing State Bank figures.
According to official data, Pakistan needed to repay $23 billion in the current fiscal year 2022-23, of which it has already repaid $15 billion in the form of external debt servicing. Of the $15 billion in debt repayments, the government repaid $9 billion while achieving a rollover of $6 billion in the first half of the current fiscal year.
Now $8 billion is required to be paid in the second half (January-June) period of the current financial year. The government has secured a commitment to receive a $3 billion rollover from the bilateral lender in March 2023. “On external debt repayment, there is an exposure of $5 billion which has not yet been met, increasing the exposure and risk for the country,” the official said.
The current account deficit (CAD) is estimated at $8 billion to $9 billion so the government will have to manage another $5 billion to finance the CAD deficit in the remaining months. CAD stood at $3.7 billion in the first half (July-December) and is expected to increase by another $5 billion in the second half (January-June) of the current financial year.
“Taking into account both outstanding external debt provision and CAD requirements, Islamabad needs another $10 billion in new borrowings which have not been completed as per estimates so far,” official sources said.
According to the State Bank’s presentation, “The completion of the 9th review will improve the outlook for the external sector.”
It added that global economic prospects are subdued amid fears of a global recession. However, it provides some respite for global commodity prices and allows central banks to ease their aggressive tightening.
This additional amount of $8-10 billion cannot be achieved without revitalizing the IMF program. The government is making a last-ditch effort to revive the stalled IMF program. The government has shared the modalities of the upcoming negotiations and is awaiting the IMF’s response to hold the next round of negotiations.
