Pakistan is in dire need of $24 billion in interest-free financing from non-resident Pakistanis to avoid defaulting on foreign debt repayments. With time running out, open market currency dealers are set to approach the government once again next week to kickstart the scheme. However, the government’s preoccupation with domestic politics has seemingly left little room for discussion on the proposed scheme to attract $1 billion a month over the next 24 months.
Speaking to the Express Tribune, Exchange Companies Association of Pakistan (ECAP), President, Malik Bostan revealed that Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar have expressed their full commitment to raising the financing from expatriates when the proposal was put forward to them almost one month ago. “I will write letters to them (PM and FM) soon after the end of the ongoing Eid holidays (ending on April 25),” he said. The government, however, has not yet responded to the proposal, and Pakistan is quickly running out of time to secure foreign financing to avoid defaulting on its foreign debt repayment.
The higher authorities have already said they would document each and every single penny in the financing under consideration and that the International Monetary Fund (IMF) would be taken on board as well.
ECAP General Secretary, Zafar Paracha said, “So far, the government has given no response over the proposal to fetch $24 billion for the country.”
He believes that the political impasse between the government and opposition has left no time for the authorities to work on the scheme. He urged the government to take action immediately, warning that a further delay would worsen the already dire economic crisis in the country.
He emphasised that the scheme to borrow $24 billion from overseas Pakistanis is not a backup plan to be used only if the IMF programme is permanently suspended. Instead, it will be done in tandem with the IMF. “The IMF programme and financing from non-resident Pakistan, both the projects are to be done at the same time. There is no plan ‘A’ and plan ‘B’ between the two,” he said.
Paracha acknowledged that raising $1 billion a month from non-resident Pakistanis is no small feat and that the process may take time.
“We might be able to arrange $500 million a month against our estimate of $1 billion a month. So, the government should find some time for the scheme to implement as soon as possible,” he urged.
He further emphasised that the financing will be raised in compliance with FATF’s (Financial Action Task Force) rules and regulations for anti-money laundering and terror financing.
The ECAP president recalled that this is not the first time exchange companies have arranged funds from overseas Pakistanis for the country. In 1998, they raised $10 billion in response to a similar financial crisis caused by international sanctions after Pakistan became a nuclear state.
Pakistan’s foreign exchange reserves are critically low, standing at just $4.03 billion. The country needs to repay $4.5 billion in foreign debt by the end of June 30, 2023, leaving the government with no choice but to drastically cut imports, causing the closure of a large number of factories and rendering almost five million people jobless.
The government is making all efforts to resume the IMF’s $7 billion loan programme to help alleviate the country’s current economic and financial crisis. However, with time running out, the proposed scheme to attract $24 billion in interest-free financing from non-resident Pakistanis may prove to be the saving grace for the country.
Pakistan’s dire need for foreign financing cannot be overstated. The government must act quickly and take advantage of all available resources to prevent a possible default on foreign debt repayment. The scheme to borrow $24 billion from non-resident Pakistanis could provide a much-needed lifeline for the country, and it is imperative that the government works to ensure its success.
Published in The Express Tribune, April 25th, 2023.
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