The coalition government revealed its strategy to the International Monetary Fund (IMF) for obtaining an additional $3 billion to close the financing gap as it accelerates efforts to persuade the lender to release the next loan installment.
Nathan Porter, the IMF’s mission chief for Pakistan, confirmed last week that the IMF is seeking “necessary” financing assurances as soon as possible to finalize negotiations with Pakistan on its delayed bailout.
The IMF has asked Pakistan to arrange $6 billion in external financing, which the struggling $350 billion economy needs until June to avoid default. The $6 billion financing gap was calculated based on the assumption that the current account deficit would remain around $7 billion for the fiscal year.
The IMF has indirectly acknowledged commitments from key bilateral partners, such as the United Arab Emirates and Saudi Arabia, although these pledges fall short of Pakistan’s needs.
According to sources, Islamabad has informed the Washington-based lender of its plan to secure a $450 million RISE-II budget support loan. Additionally, plans to obtain $1 billion from the Asian Infrastructure Investment Bank (AIIB) and other commercial banks were shared with Fund officials, along with plans to actualize pledges made at the Geneva conference.
Once an agreement is reached with the IMF, Pakistan is expected to find it easier to secure financing. The country’s foreign exchange reserves have dwindled to cover only a month of imports after IMF funding was delayed in November and subsequently affected by fiscal policy adjustment issues.
The resumption of the bailout package agreed upon in 2019 is crucial for Pakistan to avoid defaulting on external payment obligations. The IMF program will disburse over $1 billion to Pakistan before concluding in June, unlocking additional bilateral and multilateral financing for the financially-strapped nation.
