ISLAMABAD: The International Monetary Fund (IMF) has projected Pakistan’s gross external financing needs at $18.813 billion for the current fiscal year 2024-25 which is 4.7 percent of the GDP.
The Fund in its latest report “2024 Article IV Consultation and request for an Extended Arrangement under The Extended Fund Facility” noted that the country’s external financing need would be $20.088 billion in the fiscal year 2025-26. The report also noted that available financing is $18.175 billion for the current fiscal year 2024-25.
The Fund stated that the program is fully financed, with firm commitments for the first 12 months andgood prospects thereafter. Financing committed for fiscal year 2025 includes $16.8 billion of rollovers ofexisting short-term financing and $2½ billion of additional commitments, including from China,Saudi Arabia, the ADB and the IsDB. The authorities have also received firm commitments from keybilateral partners to (at least) maintain their existing exposures throughout the program, includingby continuing to rolling over existing short-term liabilities, which will contribute to meetingfinancing needs in the remaining program period. Loans from foreign commercial banks totaling $6.6 billion, which were renewed during the 2019 EFF and 2023 SBA, are also expected to continue to be rolled during the new program period. These together with commitments from multilateral institutions provide the necessary financing assurances. Nonetheless, financing risks remain high, and continued monitoring will be needed to ensure timely and adequate financing during program reviews.
The Fund stated that multilateral disbursements are projected to reach $14 billion over fiscal year 2025-28 (including $7.1 billion from the World Bank and $5.6 billion from the Asian Development Bank) with key bilateral creditors fully maintaining their exposure through new financing activities. Modest access to new short-term borrowing from commercial banks is anticipated for fiscal year 2025-fiscal year 2026, with a gradual return to bond markets assumed for mid-fiscal year 2027, reflecting a restoration of policy credibility.
Pakistan’s capacity to repay is subject to significant risks and remains critically dependent on policy implementation and timely external financing. The Fund’s exposure would reach SDR 6,816 million by September 2024 (336 percent of quota) with purchases linked to the request. With completion of all purchases under the arrangement, the Fund’s exposure would peak in September 2027 at SDR 8,774 million (432 percent of quota; approximately 55 percent of projected gross reserves for fiscal year 2027) around double the average for recent EFFs. Exceptionally high risks—notably from high public debt and gross financing needs, low gross reserves and sociopolitical factors—could jeopardize policy implementation and erode repayment capacity and debt sustainability. Restoring fiscal and external viability is critical to ensure Pakistan’s capacity to repay the Fund. This hinges on strong and sustained policy implementation, including, but not limited to, fiscal consolidation and external asset accumulation, as well as decisive reforms to enable stronger and more resilient economic development, it added.
The Pakistani authorities have stated that they have secured adequate financing from our international partners to support our economic reform program and durably increase our external buffers. The current projections suggest that, after incorporating pre-existing financial commitments, rollovers and the envisaged IMF program, residual financing needs during the program period will amount to $5 billion.
Copyright media, 2024
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