After Pakistan received a $2 billion relief in the shape of the UAE rolling over a maturing debt, the interim government has requested the International Monetary Fund (IMF) to dispatch a new mission this month for talks for the last loan tranche of $1.2 billion.
The developments come amid new adjustments the IMF has made in its fresh staff-level report about the available financing to Pakistan. The Washington-based lender has increased the projection of budget support loans to $3 billion but cut the project financing to $3.7 billion for this fiscal year.
The overall external financing requirements have been reduced to little under $25 billion with minor downward adjustments in the current account deficit projections, the report showed.
State Bank of Pakistan (SBP) Governor Jameel Ahmad on Wednesday told The Express Tribune that the UAE had extended the debt repayment of $2 billion for another year. The central bank governor said all the formalities for the rollover of the UAE loan had been completed.
Ahmad continued that the IMF had also disbursed the second loan tranche of $706 million on Tuesday, resulting in a total $1.9 billion disbursement under a $3 billion bailout programme.
These two developments have provided a relief to the tune of $2.7 billion at a time when the country’s overall foreign exchange reserves still remained in a single digit despite being under the IMF umbrella since July last year.
The $1 billion UAE debt, which matured on Wednesday, has now been extended for yet another year.
The second $1 billion UAE debt will mature on January 23.
Last week, the finance ministry requested the UAE to further rollover the loan for a period of one year.
The UAE has placed $3 billion with the SBP to support the thin foreign exchange reserves, including $1 billion handed over after the approval of the IMF programme in July 2023.
The $2 billion had been given at an interest rate of 3% but the latest $1 billion was extended at 6.5% -- more than double of the old one, according to the finance ministry official.
The Prime Minister’s Office had requested the UAE leadership to extend the $2 billion loan on the old terms.
Apart from the UAE, Saudi Arabia has deposited $5 billion with the SBP.
China has also granted $4 billion deposits -- $2 billion of it maturing in March.
The deposits from these three countries amount to $12 billion but the country’s official reserves still stand at under $9 billion.
The UAE, China and Saudi Arabia have linked the renewals of their loans with the continuation of the engagement with the IMF and the approval of the first programme.
Read also: Pakistan receives $700m tranche from IMF as UAE rolls over $2b loan
Sources said the finance ministry had requested the IMF to send a new mission to Pakistan for the second review – for the period from October to December -- aimed at securing the last loan tranche of $1.2 billion.
They added that the finance ministry had requested the IMF to send the mission before the end of the current month.
The request was in line with the statement that interim Finance Minister Dr Shamshad Akhtar made in November after reaching a staff-level agreement with the IMF.
However, the global lender has not responded to Pakistan’s request yet.
The February 8 general elections may play a role in the IMF’s decision whether to send the mission in January or wait for the outcome of the polls.
The IMF’s next mission is critical for not only securing the last loan tranche but also for beginning negotiations for a new long-term programme.
While speaking to a private TV news channel a day earlier, former finance minister Ishaq Dar said in case his party -- the PML-N – won the elections and formed the government, the decision about the new IMF programme would be made at the earliest.
Dar -- a four-time finance minister of the country – added that in case his party decided not to enter the IMF programme, it would immediately start implementing the belt tightening measures.
The IMF’s first review staff-level report suggested that the global lender had made a minor adjustment of $575 million in its current account deficit projection in comparison with July’s estimates.
The IMF has now projected the deficit at $5.7 billion or 1.6% of the GDP -- an estimate that appeared on the higher end.
During the first half of this fiscal year, the current account deficit remained at only $831 million, according to the SBP.
A central bank official said during the current fiscal year, the deficit might remain in the range of half a percentage point of the GDP or $1.8 billion.
The IMF has downward revised Pakistan’s external financing requirements from $28.3 billion to $25 billion for this fiscal year.
The $3.4 billion downward adjustment has been made on the back of nearly $2 billion reduced repayments by the private sector, about $720 million less repayment by the public sector and current account deficit adjustments of $575 million.
As against the earlier projection of $4.6 billion available project financing, the global lender has shown the estimated receipts at around $3.7 billion.
However, it has increased its estimates of budget support loans from $2.5 billion to $3 billion.
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