The coalition government of Pakistan has revealed its plan to the International Monetary Fund (IMF) for obtaining an additional $3 billion to fill the financing gap as it tries to persuade the lender to release the next loan tranche.
In order to conclude talks with Pakistan regarding its delayed bailout, the IMF required “necessary” financing guarantees as soon as possible. Pakistan was asked to raise $6 billion in external financing, which is required by the country until June to avoid a potential default.
This figure was determined on the assumption that the current account deficit would remain at around $7 billion in the current fiscal year. The IMF welcomed the recent announcement of financial support from key bilateral partners, but this support is inadequate for Pakistan’s requirements.
Islamabad informed the IMF about its plan to secure a $450 million second Resilient Institutions for Sustainable Economy (RISE-II) budget support loan, as well as its plans to obtain $1 billion from the Asian Infrastructure Investment Bank (AIIB) and other commercial banks, and to materialise pledges made at the Geneva moot. According to sources, once the staff-level agreement is signed with the IMF, it will become easier for Pakistan to obtain financing.
Pakistan’s foreign exchange reserves have fallen to cover barely a month of imports following the stall in IMF funding in November, which was later complicated by snags over fiscal policy adjustments after officials from the lender visited Islamabad for talks in February. The fiscal policy adjustments were part of the ninth review exercise on a bailout package agreed upon in 2019, whose resumption is crucial for Pakistan to avoid the risk of defaulting on external payment obligations.
Pakistan will receive another disbursement of more than $1 billion from the IMF programme before it ends in June, which will unlock other bilateral and multilateral financings for the country, helping to ease its financial difficulties.
Programme loans from other multilateral agencies await completion of the IMF review, as reported by central bank governor Jameel Ahmad during the spring meetings of the lender and the World Bank in Washington.
