The country is counting on the $3 billion program to turn around its ailing economy, grunting under the hefty foreign debt service burden accumulated over the years.
By Muhammad Ali
ISLAMABAD: Pakistan has delivered on the two agreed “prior actions” to pave the way for the approval of the executive board of the International Monetary Fund (IMF) for 9-month $3 billion Standby Arrangement (SBA) for the country, Independent Pakistan can report.
Officials told Independent Pakistan Thursday the authorities have fulfilled two prior actions including Parliamentary approval of the budget for 2023-24 and lifting of restrictions on imports.
The IMF’s executive board is scheduled to meet in Washington DC on July 12 to consider the approval of Pakistan’s request for a $3 billion SBA program out of which $1.1 billion first tranche would be released within days after approval.
The IMF estimates say Pakistan faces a financing gap of $6 billion during the current fiscal year and bridging this gap with the help of its multilateral and bilateral partners will be a steep challenge for Pakistan.
Pakistan’s Prime Minister Shehbaz Sharif and IMF Managing Director Kristalina Georgieva have secured assurances from international creditors to fill a $6 billion financing gap for 2023-24. If this gap is not filled, the IMF’s SBA program will be unable to achieve its desired results.
Pakistan is expecting additional $2 billion in deposits from Saudi Arabia, $1 billion from the United Arab Emirates, $1 billion from the Islamic Development Bank, $450 million from the World Bank, $250 million from the Asian Infrastructure Investment Bank, and the remaining amount from pledges made at the Geneva conference on the devastating floods.
Tallying the numbers, it is clear that Islamabad requires an additional $600 million to demonstrate that it has secured $6 billion in financing under the EFF program.
Pakistan has also requested China to roll over a $1 billion deposit in July 2023 after the Iron Brother rolled over a $1 billion deposit in June 2023.
As of June 30, 2023, the foreign exchange reserves held by the State Bank of Pakistan have increased to $4.46 billion. Counting $5.28 billion held by commercial banks, the total liquid foreign reserves held by the country stood at $9.74 billion as of June 30, 2023.
During the week ended on June 30, 2023, SBP reserves increased by $393 million to $4.462 billion mainly due to receipt of official GoP inflows. This increase is chiefly attributable to receipt of official government inflows.
In sum, Pakistan is working to secure the necessary financing to fill a $6 billion financing gap of the current fiscal’s budget. The government has secured assurances from international creditors, and the foreign exchange reserves have increased. However, additional financing is still needed.
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