Pakistan narrows external funding gap, hopes for IMF deal soon

PAKISTAN has lined up US$4 billion in external funding out of a US$6 billion target as part of its efforts to revive a long-delayed bailout programme with the International Monetary Fund (IMF).

The South Asian nation is continuing its efforts to mobilise the remaining amount, the Ministry of Finance in Islamabad said on Monday (Jun 5) in an emailed response to questions from Bloomberg News, adding that it hopes to secure a deal with the lender before it unveils its budget on Jun 9.

“Pakistan remains committed to completing the IMF programme and has already demonstrated its seriousness.” The nation has seen prolonged discussions and months of delays to revive its US$6.7 billion bailout programme.

The nation faces about US$22 billion of external debt payments for the fiscal year 2024, which begins in July, according to Columbia Threadneedle Investments. That level is about five times its reserves. To meet IMF demands, authorities have raised taxes, hiked energy prices and let the rupee weaken.

The economic crisis comes as the country is also facing political stress, with former premier Imran Khan and his supporters clashing with the powerful army, a traditional power base in Pakistan.

The external funds, along with the resumption of the IMF loan, will be crucial to overcome a dollar crunch, ease supply shortages, and pull the US$350 billion economy out of default risks ahead of elections expected later this year. Pakistan’s foreign exchange reserves stand at US$4.1 billion, covering just about one month of imports, below the three-month ratio considered the minimum healthy level.

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The IMF is working with the country on the “proper market functioning” of its currency before it resumes the loan programme that ends in June, Esther Perez Ruiz, the IMF’s resident representative for Pakistan, said in an email on Monday. The engagement also focuses on the passage of a national budget consistent with programme goals and adequate financing, the fund said. BLOOMBERG