IMF forecasts ongoing need for substantial loans and grants
in Pakistan
The International Monetary Fund (IMF) has anticipated that
Pakistan will continue to require significant external financial assistance, as
pressures on exchange rates and international reserves persist.
In its Middle East and Central Asia Economic Outlook, the
IMF emphasized that Pakistan's external financial needs will remain
su
bstantial, with reserve levels expected to remain fragile in several nations,
averaging roughly 70 percent of short-term external debt in Egypt, Pakistan,
and Tunisia.
IMF
disburses $1.2 b to State Bank of Pakistan as part of Stand-By Agreement
Furthermore, the IMF projected an increase in Pakistan's
public sector gross financing requirements, reaching 21 percent of GDP by 2024
(equivalent to over Rs. 22 trillion).
The economies of the Middle East and North Africa (MENA) and
Pakistan are anticipated to face economic challenges this year due to stringent
fiscal policies in various countries aimed at restoring macroeconomic
stability, OPEC+ related constraints on oil production, and the repercussions
of recent financial market fluctuations.
In Pakistan, inflation is expected to more than double,
reaching approximately 27 percent this year, reflecting broadening inflationary
pressures. Conversely, oil-exporting countries are predicted to experience low
inflation rates in most instances.
IMF
urges swift action to recapitalize four Pakistani banks
The IMF suggests that MENA Emerging Markets and
Middle-Income Countries (EM&MIs), including Pakistan, are poised to
undertake substantial fiscal consolidation measures, including subsidy reforms
(e.g., Egypt, Morocco, Pakistan, Tunisia). This will lead to a projected
reduction in primary fiscal deficits by an average of about 3 percentage points
of GDP between 2022 and 2025, aided by IMF-supported programs in some nations
(e.g., Egypt, Pakistan) or announced programs (e.g., Tunisia).
Nonetheless, the IMF notes that tighter financial conditions
will partially offset these fiscal efforts, with interest expenses for
EM&MIs expected to rise by approximately 1 percentage point of GDP on
average during the same period. Overall, public debt-to-GDP ratios are expected
to decrease in the medium term in most EM&MIs, primarily due to the erosion
of the real value of public debt resulting from persistent inflation (Egypt,
Pakistan, Tunisia) and a rebound in economic growth.
Additionally, the IMF has issued a cautionary note,
highlighting that continued reliance on domestic financing may further intensify
the connection between the sovereign and the banking sector, especially given
the high exposure of banks to sovereign debt in certain MENA EM&MIs and
Pakistan, where such exposure exceeds 50 percent of bank assets as of the end
of 2022.
Source: Pro Pakistani