Pakistan formally requests another bailout from the IMF
Pakistan has formally requested the next bailout package from the International Monetary Fund (IMF) in the amount of $6 to $8 billion under the Extended Fund Facility (EFF), with the option of increasing it through climate funding.
The precise scope and duration, however, won’t be decided upon until May 2024, when a consensus has been reached on the main features of the upcoming program.
The News sent a message to Pakistani delegation members who are now in Washington, D.C. for the IMF/World Bank annual spring meetings, but they did not respond until this article was filed.
Pakistan has expressed interest in the EFF program and requested that an IMF review team be sent in May 2024 to finalize the specifics of the next three-year bailout package.
While Pakistani officials present a positive image of the country’s economy, the IMF noted in the Middle East and Central Asia (ME&CA) department’s most recent Regional Economic Outlook (REO) that Pakistan’s external buffers have declined, primarily as a result of continued debt service, including Eurobond repayments.
“In countries like Egypt, Kazakhstan, Pakistan, Tunisia, and Uzbekistan where inflationary pressures are still present, monetary policy ought to be stringent and data-driven, and the risks of a reversal of inflation trends should be closely monitored,” the statement continued.
Pakistan’s growth is predicted to recover to 2 percent in 2024 after declining in 2023, helped by ongoing favorable base effects in the textile and agriculture industries. Since October, Morocco’s growth estimate has been revised downward by 0.5 percentage points to 3.1 percent, mostly due to a slowdown in domestic demand.
Going forward, it is anticipated that growth in Pakistan and the MENA region’s emerging market and middle-income economies (EM&MIs) would pick up speed to around 4 percent in 2025 as the factors impeding growth this year—tight regulations and events unique to each nation, such as the fallout from conflict—will start to loosen. However, sustained stringent macroeconomic policies aimed at addressing elevated debt and inflation in many nations, in conjunction with ongoing structural obstacles, are anticipated to impede medium-term economic progress, with growth in the majority of economies continuing below historical norms.
Conversely, Pakistan and the majority of EM&MIs would continue to face major obstacles due to the public sector’s gross funding needs. In comparison to the IMF’s October predictions, public gross financing requirements are expected to grow by around 5.6 percentage points to over 115 percent of fiscal receipts ($261.3 billion) by 2024.
Pakistan’s economy has the potential to reach $3 trillion by 2047 if the reform plan is properly executed in key sectors, as Finance Minister Muhammad Aurangzeb stated at the World Bank in Washington.
Finance Minister Muhammad Aurangzeb told Reuters that Pakistan has begun negotiations with rating agencies to prepare for a return to the global debt markets and intends to finalize the terms of a fresh IMF loan in May.
During their meeting with the Fund’s Managing Director Kristalina Georgieva on Wednesday at the International Monetary Fund and World Bank Spring Meetings, Aurangzeb stated, “We expect the IMF mission to be in Islamabad around the middle of May — and that is when some of these contours will start developing.”
He did not specify the scope of the program the government was hoping to get, although Pakistan is anticipated to request at least $6 billion.
Aurangzeb continued, saying that Pakistan will ask the Fund for more funding under the Resilience and Sustainability Trust as soon as the IMF loan was approved. According to Aurangzeb, the debt situation also appeared more manageable. Since we must return around $25 billion in debt each fiscal year, “the bulk of our bilateral debt, including our debt to China, is being rolled over, so in that sense I think we are in good shape and I don’t see a big issue during this fiscal year nor next fiscal year.”
Pakistan also intends to reenter global financial markets, maybe with a green bond. Still, Aurangzeb stated that more work needed to be done before that could occur.
Attending the World Bank’s “Roundtable on Implementing for Faster Results and Greater Impact,” the finance minister emphasized that the Bank’s emphasis on digitalization, human development, and climate change was in line with the aims of the recently elected administration.
The UK’s Andrew Mitchell, Minister of State for Development and Africa, was also met by the finance minister. In order to engage in bankable projects in Pakistan, he sent an invitation to British International Investment (BII).
Later on in their meeting, the finance minister conveyed his pleasure with the state of current projects to Sultan Abdulrahman Al-Marshad, CEO of the Saudi Fund for Development (SFD).
He also spoke with representatives of Citibank. According to a post on X by the finance ministry, they talked about ongoing discussions with the IMF for a more extensive program for Pakistan. The article also stated that the involvement with Citibank highlights the ministry’s commitment to financial stability and growth.
Along with expressing condolences on behalf of Pakistan’s leadership and people for the terrorist assault against Chinese nationals in Pakistan, the finance minister met with his Chinese counterpart Lan Fo’an and reaffirmed Pakistan’s commitment to their safety and security.
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