The IMF has revised down Pakistan’s foreign loan requirements to $25 billion for the ongoing fiscal year – reducing it by $3.4 billion in a big relief for its cash-starved economy, according to a media report on Saturday.
The Washington-based global lender also lowered the economic growth projection to just 2%, turning down the government’s external as well as macroeconomic forecasts, The Express Tribune newspaper reported.
The International Monetary Fund’s delegation wrapped two-week-long talks with Pakistani officials on November 15 and announced that a staff-level agreement has been reached to enable it to release $700 million in the second tranche of an already agreed $3 billion loan.
The report said that in comparison with July this year, the IMF lowered the foreign loan requirements for this fiscal year from $28.4 billion to $25 billion.
In four months, the government has already borrowed $6 billion while it expects rollovers of $12.5 billion.
The remaining needs are about $6.5 billion in addition to the efforts for timely securing the $12.5 billion debt rollovers, said the sources.
Finance Secretary Imdadullah Bosal on Thursday said the interim government was comfortable that it would secure the needed financing to remain afloat.
However, there will not be much respite for the government as the estimated available financing has also been cut by $3.7 billion because of the problems in acquiring loans through floating Eurobonds and from foreign commercial banks.
The sources said that the IMF did not agree to Pakistan’s projection of $4 billion to $4.5 billion current account deficit during this fiscal year against the earlier projected figure of $6.5 billion.
They added that the IMF had now projected a deficit of $5.7 billion – a reduction of about $770 million in comparison with its old estimates.
The finance ministry sources told the newspaper that the IMF had further reduced its economic growth projection for Pakistan to 2% from July’s estimate of 2.5%.
The lender’s fresh forecast is now in line with the World Bank and Asian Development Bank’s projections. The IMF did not accept Pakistan’s forecast of 3% to 3.5% economic growth in this fiscal year.
The IMF also did not accept the finance ministry’s projection of imports worth $54.5 billion during this fiscal year. The lender has now estimated it at $58.4 billion, but its revised figure is $6.3 billion less than what it estimated in July this year.
Some of the gains that Pakistan will make because of the low imports are expected to be lost because of a reduction in the projected remittances. As against the old forecast of $32.9 billion, the IMF has now projected the foreign remittances at $29.4 billion – a reduction of $3.5 billion, the sources revealed.
The exports have been marginally adjusted downwards to $30.6 billion, they added. The estimates of foreign direct investment also increased from $173 million to $700 million.
The IMF also has cut the inflation rate forecast from 25.9% to 22.8% – a move that should provide space for lowering the interest rates at least in January’s monetary policy announcement, according to the paper.
The IMF did not accept the finance ministry’s projections for the current account deficit, imports, economic growth, inflation and gross financing requirements.
It quoted finance ministry sources as saying that the IMF had also lowered its inflation projection for the country to 22.8% for this fiscal year – reducing it from 25.9%.
However, it adjusted all these numbers during the first review talks in comparison with the estimates of July this year.
The revisions to the gross external financing requirements – a sum of money needed to fill the CAD as well as the repayment of maturing debt – and to the macroeconomic projections were made during this week’s first review of the $3 billion bailout package.
It also brought the purview activities of the Special Investment Facilitation Council, a joint civil-military forum set up this year to expedite investment and development.
The IMF remained successful in acquiring a date for the general elections and in return ignored a few critical areas, which in the past had become a cause for the failure of the previous $6.5 billion bailout package, the report said.
