Finance Minister Miftah Ismail said Pakistan needs about $36 billion to $37 billion in financing for the fiscal year starting June, making it even more crucial to ensure an agreement with the International Monetary Fund (IMF).
Speaking at a virtual webinar on “National Dialogue on Economy: The Way Forward for Pakistan” on Saturday, the Minister remarked, “All roads lead to the IMF.”
He said the government could not secure funding from the global bond market, and commercial banks have given short-term loans in the past. Pakistan seeks to ensure a staff-level arrangement with the IMF in June, reported Bloomberg.
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“Pakistan is to repay USD 21 billion in foreign debt in the next fiscal year, so it is a must to enter the International Monetary Fund (IMF) loan programme (worth USD 6 billion) to arrange the required financing.”
Pakistan’s dollar bonds, which reached a record low this month, gained on Friday (May 27)after the government raised fuel prices, a key benchmark for the IMF to resume its loan program.
The decision was made after the nation is said to have picked banks JPMorgan Chase & Co., Citigroup Inc., Standard Chartered Plc, and Credit Suisse Group AG to manage any bond sale.
The financing will help Pakistan increase its foreign exchange reserves to about $15 billion next fiscal year from about $10 billion.
The value of Pakistan’s bonds has shrunk by around 30%. The Express Tribune cited Ismail as saying that the USD 1 bond – trading at 70 cents when the PMLN-led coalition government came to power in early April – is now trading at 65 cents.
“This means we cannot float Eurobonds in the world market to raise fresh funds, nor can we go to (global) commercial banks right now,” the Minister said.
Former Prime Minister Imran Khan reduced and froze fuel prices, stalling the $6 billion bailout program. After Khan’s ouster in April, his successor Prime Minister Shehbaz Sharif, banned luxury imports.
Read more: PDM govt succumbs to IMF as it hikes petrol rate
Meanwhile, the central bank raised borrowing costs more than expected this month to deal with all-time high imports.
PM Shehbaz Sharif also went to Saudi Arabia and other friendly countries to acquire financing.
They are ready to extend loans, but only after Pakistan enters the IMF programme; however, the IMF linked the revival of its loan programme to removing subsidies on petroleum products. Hence, the government initiated the process of reversing the subsidy with effect from Friday.
An IMF deal would help secure funds from other sources such as the World Bank and friendly nations, including China.