Pakistan has submitted a revised external financing plan to address a $5 to $6 billion funding gap by the end of June 2023 and requested the International Monetary Fund (IMF) to agree on a staff-level agreement as soon as possible.
According to media sources there are differences between the IMF and Pakistani authorities over the exact financing requirements, with the IMF insisting on managing the gap of $6 billion, while the Pakistani authorities projecting a gap of $4 to $5 billion.
Pakistani officials have been meeting with the IMF in Washington and via Zoom to work out a credible plan to manage the financing of $6 billion. The IMF has made it clear that a staff-level agreement can only be reached if Pakistan can demonstrate its ability to manage the financing gap.
Efforts are currently underway to secure additional deposits of $2 billion from the Kingdom of Saudi Arabia and the possibility of further Government to Government (G2G) assistance from the KSA. The UAE has also committed to an additional $1 billion deposit, with efforts underway to increase the amount.
Chinese commercial banks are also expected to provide $1 billion, while project financing on flood assistance is expected to bring in dollar inflows.
A top official of the Finance Ministry said they were in constant touch with the IMF to make all-out efforts to strike a staff-level agreement. However, an outstanding issue remains on how the 10th and 11th Reviews will be undertaken when the ongoing Extended Fund Facility (EFF) program ends in June 2023. The 9th Review has not yet been completed, leaving only two months and 10 days to complete the remaining reviews.
Differences persist between the IMF and Pakistani authorities over the exact financing requirements, with both sides assessing different numbers on account of the Current Account
Deficit (CAD). The IMF estimated the external financing gap at around $6 billion, while Pakistani authorities persistently argued that it would remain in the range of $4 to $5 billion, considering the shrinking CAD.
The Current Account Deficit has reduced significantly, standing at $3.8 billion during the first eight months of the current fiscal year 2022-23, compared to $12.07 billion in the same period of the last financial year 2021-22.
The Pakistani authorities claim that the CAD will be restricted to around $4 billion in the current fiscal year, while the IMF assessed that it could go up to $5 to $6 billion if import restrictions are relaxed.
The government is hopeful that a staff-level agreement with the IMF will enable it to secure more financing from multilateral creditors and commercial loans from banks based in Abu Dhabi.
The World Bank’s RISE program, along with co-financing of the AIIB, could also provide $900 million. Official announcements are expected soon regarding additional external financing requirements for Pakistan.