According to IMF assessment, Pakistan requires gross external financing of slightly over $29bn
The minister says she will advise on the external funding gap after the review.
Loans from multilateral lenders linked to review, official says.
External financing gap "the most serious threat", experts say.
ISLAMABAD: Finance Minister Dr Shamshad Akhtar has ruled out the possibility of Pakistan asking the International Monetary Fund (IMF) to increase the timeframe or size of the Stand-By Arrangement (SBA), while government officials would also advise on how to materialize the external financing gap once a successful review is completed , The News reported Thursday.
Following their arrival in Pakistan on November 2, fund officials are negotiating with Islamabad to conclude a staff-level agreement under the $3 billion SBA program. These talks will end on the 15th of this month.
The delegations to the talks, from the IMF and Pakistan, were led by the finance minister and the lender's head of mission, Nathan Porter, with both also meeting at the same venue during the week.
The News asked Dr. Akhtara whether there is a possibility that Pakistan will ask the IMF to increase the SBA program from March to June 2024 and increase the size from the existing $3 billion to $3.5-4 billion, the minister categorically replied, "No".
To another question about the gap in external funding, the Minister replied that she would advise after a review.
Another official privy to the ongoing talks with the IMF said program loans from multilateral lenders including the World Bank, Asian Development Bank, Asian Infrastructure Investment Bank and the Islamic Development Bank (IsDB) were tied to a successful ongoing review of the IMF program.
The IMF estimated Pakistan's gross external financing requirements at slightly over $29 billion including external debt service of $24.5 billion and a current account deficit of $4.5 billion. Now that Pakistan is expecting USD 11 billion in deposit refinancing and commercial refinancing from bilateral friends, Islamabad would have to secure USD 18 billion in external loans this fiscal year, assuming all other dollar inflow targets like exports, remittances and foreign direct investment. to the expected mark.
There are some serious risks to the inflow of dollar debt, including a $5 billion commercial loan, $1.5 billion through the introduction of international bonds, and $500 to $750 million from the IsDB through the ITFC of the $1 billion allocated.
If interest rates at the global level, especially in the United States of America, were to fall and oil prices in the international market would collapse, Islamabad could catch its breath, otherwise its external financial distress could become a serious threat.
Independent economists predict that the gap in external financing may be around $6 billion to $7 billion in the current fiscal year. This is the most serious threat to the economy and exchange rate stability.
On the fiscal front, sources said IMF and FBR top officials discussed structural changes in tax administration, tax policy, tax administration, documentation/digitization, tracking and tracing system and its implementation for major revenue-bearing sectors including sugar and tobacco. , cement and others. The FBR's annual tax collection target of Rs 9415 billion has so far been unchanged during rounds of technical-level talks between the two sides.
In the energy sector, the IMF raised questions about the delayed increase in gas tariff from November 2023 against the fund's commitment to increase it with effect from July 1, 2023. The government is also due to increase the gas tariff from January 1, 2024.
In the power sector, official sources told the IMF that the government has released a subsidy of around Rs 70 billion in the first week of October 2023. It is important to mention here that the government released only Rs 2.5 billion subsidy in the first week. quarter (July-September) against a total allocation of Rs 1,064 billion for the entire financial year 2023-24.
Losses to power sector distribution companies were estimated at Rs 589 billion, of which Rs 200 billion could not be recovered. So the remaining Rs 389 billion could be recovered and so far the government has launched an anti-theft campaign and has recovered around Rs 50 billion. If this anti-theft drive continues unabated for the remaining period, total electricity bill collections from power distribution companies could improve by Rs 200-250 billion, thus reducing annual losses by 50-60%.
“We expect that 50-60% recovery of stolen electricity could be collected in the current fiscal year out of the total Rs 589 billion,” said a top official.
