IMF deal yet to boost foreign loans

International lenders provide $2.7b in Jul-Oct compared to $5.8b last year

ISLAMABAD:

The International Monetary Fund (IMF) bailout package has not yet instilled confidence among Pakistan's foreign creditors, which disbursed only $2.7 billion in loans during the first four months of the current fiscal year, down by more than half, show official statistics.

The Ministry of Economic Affairs has released the official disbursement data for the July-October period of fiscal year 2024-25, which suggests that foreign financing has not yet been accelerated.

The ministry reported that during the first four months of FY25, the global bilateral and multilateral lenders disbursed less than $1.7 billion, excluding the IMF's first loan tranche.

After adding the IMF installment, the total disbursement reached $2.7 billion compared to $5.8 billion in the same period of last fiscal year, exhibiting a reduction of about $3.1 billion, or 55%.

The government and the central bank separately report the loan release data of the IMF and other bilateral and multilateral creditors.

International creditors are reluctant to extend new budget support financing except for the Asian Development Bank (ADB). Saudi Arabia has not yet approved a $1.2 billion oil facility while project funding is also moving at a snail's pace.

The IMF programme had been expected to unblock other financing lines but due to the low credit rating of Pakistan, coupled with slow movement in different projects, the country is struggling to meet its external financing needs.

The government's decision to slow down the release of development budget due to fiscal constraints has also impacted the disbursement of foreign funding for these schemes.

During unscheduled discussions last week, the IMF pointed out a discrepancy in the external debt disbursement data reported by the Ministry of Economic Affairs and the Debt Management Office of the Ministry of Finance, sources said.

Pakistan has planned to borrow a minimum of $23 billion in this fiscal year, including the rollover of $12.7 billion in bilateral debt, to finance its swelling development programme and meet the nation's external financing requirement.

Out of the borrowing of $23 billion, the government has included $19.2 billion in budget documents. It has not made the rollover of $3 billion by the United Arab Emirates (UAE) and IMF repayments part of federal books as these are meant for balance of payments support.

Pakistan had assured the IMF that China's Exim Bank would roll over $3.4 billion worth of project debt and Saudi Arabia would provide a $1.2 billion oil facility. However, so far there have been no significant developments in both cases, although China has engaged with the government.

Executive directors of these countries have directly given assurances to the IMF board and Islamabad hopes these transactions will take place soon.

Data of the Ministry of Economic Affairs showed that the multilateral creditors released $697 million from July to October, which constituted 16% of the annual estimate.

The ADB gave $170 million in four months for multiple schemes compared to the annual estimate of $1.7 billion. The World Bank provided $349 million against the annual estimate of $2 billion. Its funding mainly came for the Sindh Flood Reconstruction Project and the Higher Education Commission development programme.

Meanwhile, Finance Minister Muhammad Aurangzeb on Tuesday met World Bank Country Director Najy Benhassine.

A statement released by the finance ministry said that Aurangzeb highlighted the importance of collaboration with the World Bank to support Pakistan's economic reforms and development agenda.

He appreciated the World Bank's financial and technical assistance across various sectors and reiterated the government's commitment to fiscal discipline, sustainable growth and efficient resource utilisation.

The World Bank's $400 million loan for the Pakistan Raises Revenue programme has failed to achieve its objectives.

The finance ministry said that issues related to the agricultural income tax and general sales tax (GST) harmonisation in coordination with provinces and enhanced focus on the active role of National Tax Council came under discussion.

The Ministry of Economic Affairs reported that the Islamic Development Bank released $150 million, mainly for an oil facility, in four months of FY25. The annual estimate is $740 million. Pakistan also budgeted to raise $1 billion by issuing sovereign bonds but so far no progress has been made. The finance minister has announced that Panda bonds will be issued by December, a deadline he may again miss.

The rollover of $5 billion worth of Saudi cash deposit and $4 billion in Chinese cash deposit is also part of the government's plan. The economic affairs ministry reported no progress on those two fronts.

During negotiations with the IMF, the finance minister had stated that the Fund asked Pakistan to secure rollovers for three years. However, the lenders did not agree.

On July 28, after returning from Beijing, Aurangzeb stated, "We are requesting an extension in maturity of the existing cash deposits by three to five years."

Pakistan had taken $5 billion from Saudi Arabia, $4 billion from China and $3 billion from the UAE for one year. However, due to its inability to pay back the loans, the country is securing a one-year extension every time.

The Ministry of Economic Affairs' report stated that the country received $542 million on account of investment in Naya Pakistan Certificates, which was higher than the annual estimate.

Against the budgeted $3.8 billion worth of commercial loans, the government received $200 million and that too because of a rollover by China in September.