IMF rings alarm bells about Pakistan’s external financing

IMF rings alarm bells about Pakistan’s external financing

ISLAMABAD: The International Monetary Fund (IMF) has warned that Pakistan faces exceptionally high external financing risks and any delays in receiving the planned funds from international lenders or donors could jeopardize the government’s economic programme.

In a Memorandum of Economic and Financial Policies, the IMF said that Pakistan needs to secure adequate financing from its international partners to support its economic reform programme, which aims to stabilize the economy and reduce the fiscal and external imbalances.

The IMF said that Pakistan’s gross external financing needs for the fiscal year 2023/24 are projected to be around $25 billion, of which $13.8 billion are repayments of the public sector debt.

The IMF said that any shortfalls in external financing would force the government to borrow more from domestic banks, which would crowd out private credit and increase the interest burden.

The IMF also cautioned that Pakistan could face pressure on its exchange rate and external stability due to higher commodity prices, tighter global financial conditions, and geopolitical conflicts.

Moreover, the IMF said that political tensions ahead of the upcoming elections could affect policy decisions and reform implementation.

Pakistan has assured the IMF that it has secured $5.6 billion in additional financing commitments from bilateral, multilateral, and commercial partners, of which over $3 billion has already been disbursed.

Pakistan has also obtained commitments from these partners for $7 billion in rollovers, $1 billion in refinancing of maturing debt, and $1.2 billion in amortization savings from a debt rearrangement of some existing external loans.

The IMF said that in line with the programme financing commitments, key bilateral creditors will at least maintain their exposure to Pakistan.

Pakistan and the IMF have reached a staff-level agreement on a 9-month Stand-By Arrangement (SBA) for $3 billion to support Pakistan’s economic stabilization programme.

Under the SBA, the IMF recently released $700 million to Pakistan.

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