IMF adjusts Pakistan's foreign loan requirement to $25 billion
The International Monetary Fund (IMF) has revised Pakistan's
foreign loan requirement to $25 billion for the current fiscal year, marking a
reduction of $3.4 billion. The IMF has also modified its economic growth
projection to 2%, rejecting the government's external and macroeconomic
forecasts.
The Finance Ministry disclosed that the IMF has revised its
inflation projection for the fiscal year to 22.8%, down from the earlier
estimate of 25.9%. However, the IMF did not endorse the Finance Ministry's forecasts
for the current account deficit (CAD), imports, economic growth, inflation, and
gross financing requirements.
IMF
forecasts ongoing need for substantial loans and grants in Pakistan
During the first review talks of the $3 billion bailout
package, the IMF made adjustments to the gross external financing requirements
and macroeconomic projections, deviating from the estimates provided in July of
the same year.
The IMF successfully secured a date for general elections
during these negotiations, overlooking some critical areas that had previously
led to the failure of a $6.5 billion bailout package. It also brought the
Special Investment Facilitation Council's activities under its purview.
Despite borrowing $6 billion in the past four months and
expecting rollovers of $12.5 billion, the government still needs approximately
$6.5 billion in additional financing. Finance Secretary Imdadullah Bosal
expressed confidence that the interim government would secure the required
financing.
Pakistan's
debt reaches Rs 64 trillion: SBP
However, the government may face challenges as the estimated
available financing has been reduced by $3.7 billion due to difficulties in
obtaining loans through floating Eurobonds and foreign commercial banks.
The IMF disagreed with Pakistan's projection of a $4 billion
to $4.5 billion CAD for the fiscal year, instead estimating a deficit of $5.7
billion, a reduction of approximately $770 million from its previous estimates.
The lender also disagreed with the Finance Ministry's projection of imports at
$54.5 billion, providing a revised estimate of $58.4 billion, which is $6.3
billion less than the July estimate.
Furthermore, the IMF reduced its projection for foreign
remittances from $32.9 billion to $29.4 billion and marginally adjusted exports
to $30.6 billion. The $3.4 billion reduction in foreign loan requirements was
attributed to lower private sector repayments and a rollover of public sector
debt repayments by China's Exim bank.
Pakistan
pays back over $1b debt to international financial institutions
The estimated available financing, which was initially $30
billion, has been reduced to $26.6 billion, reflecting a lack of interest from
global markets and foreign commercial banks in providing fresh loans to
Pakistan.
The IMF's program loan receipts were adjusted from $2.5
billion to $300 million, compensated by an increase in project financing
estimates from $4.6 billion to $5.6 billion.
Despite slow inflows of loans in October, totaling $315
million, the total lending to Pakistan has reached $6 billion in four months.
The IMF also reduced its economic growth projection for
Pakistan to 2%, aligning it with the World Bank and Asian Development Bank's
projections, and cut the inflation rate forecast from 25.9% to 22.8%. This
adjustment may create space for lowering interest rates, possibly in the
upcoming January monetary policy announcement. The year-on-year inflation
forecast for June next year was slightly increased to 16.5%.
The Finance Ministry had projected a range of 20% to 22% for
inflation, exceeding the official target of 21%. The interim federal finance
minister stated that the pace of inflation would begin to decelerate from
January next year, but potential increases in electricity and gas prices could
impact these projections.
Source: Express Tribune