By Staff Reporter
ISLAMABAD: Pakistan will need a new short-term loan from the International Monetary Fund (IMF) to cope with its fragile economy and may seek a longer-term program later, the caretaker finance minister said on Thursday.
Shamshad Akhtar told reporters that Pakistan could not manage without IMF support as it faced a widening current account deficit, falling foreign exchange reserves and rising inflation.
“Pakistan requires a fresh short-term IMF program … We need to continue with the IMF as our economy is still fragile and we will possibly seek another loan,” Akhtar said. “Until we can increase exports and domestic resources, we will need another program. The country will not survive without this.”
The minister said Pakistan would probably have to go into another Extended Fund Facility (EFF) with the Washington-based lender but added that this was premature to discuss.
Her remarks came a day after Pakistan reached a staff-level agreement with the IMF for a $700 million disbursement under a $3 billion program, underscoring the severity of the economic and political crisis in the country.
Pakistan avoided a default on its debt by securing the current nine-month loan program from the IMF in July and hopes the completion of its first review and inflows from other donors will boost its dwindling reserves that fell to $7.4 billion in the week ended Nov. 10, less than two months of imports.
An IMF successful review is also likely to unlock program and project loans from other multilateral lenders, such as the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, and the Islamic Development Bank.
Akhtar said she expected the country’s foreign reserves to rise in December after pledges made by global lenders materialize.
“The World Bank was expected to disburse $2 billion in loans during the current fiscal year, while the government is also in advanced talks with two commercial lenders to secure $3.5 billion in financing.”
The minister said the government had shelved a plan to raise funds from the global bond market as it would not get the best price and was looking for other funding sources.
“I have decided to postpone the new (international) bond. It is going to be expensive. Interest rates are very high. So, we cannot go to the international market, but would repay a $1 billion bond maturing in April 2024 on time.”
Akhtar said the government would consider launching an environmental, social and governance (ESG) bond in the international market if the interest rates eased in the second half of the fiscal year.
The minister said the government was committed to hiking electricity and gas tariffs to reduce the losses of state-owned power companies, which have been a major drain on the budget.
“The government has decided to increase the tariffs of electricity and gas … We must do this because we have to reduce the circular debt and the subsidies.”
Akhtar said the caretaker government was ready to hand over the reins of the economy to the incoming elected government, which would be formed after the general elections scheduled in Feb, 2024.
“We have tried to maintain the macroeconomic stability and fiscal discipline … We have also tried to create some space for the next government to take its own decisions.”
Copyright © 2021 Independent Pakistan | All rights reserved
