Pakistan has decided to seek a rollover of around $12 billion debt from key allies such as China in the 2024-25 fiscal year to meet a whopping $23 billion worth of gap in its external financing as the federal government aims to achieve budget targets before the expected arrival of an IMF team to the cash-strapped country.
According to the Finance Ministry insiders, $5 billion from Saudi Arabia, $3 billion from the UAE and $4 billion from China will be rolled over, adding that the estimate of further new financing from China would also be included in the next financial year’s budget, The Express Tribune newspaper reported.
Pakistan will receive more than $1 billion from the International Monetary Fund (IMF) under the fresh loan programme, whereas new financing from the World Bank and Asian Development Bank has also been included in the estimated budget.
According to the Finance Ministry sources, new loan programme agreements will be made with financial institutions. The federal government aims to achieve budget targets before the anticipated arrival of the IMF review mission in Pakistan.
Negotiations for a new loan programme with the global lender are expected to commence in mid-May ahead of the budget which will be presented in June. The Finance Ministry sources said the Ministries had been instructed to complete the targets before the negotiations on the new loan programme.
They added that the details would be given to the IMF delegation when all the important targets were met. It has also been decided to have the budget strategy paper approved by the federal Cabinet before the IMF review mission arrives in the country.
According to the sources, the Finance Ministry has started preparing the budget to set the targets for debt repayment, defence budget and tax collections. Besides, the development and ongoing budget targets will also be determined, according to the paper.
Pakistan has been suffering the chronic ailment of how to meet external liabilities. Traditionally, it depended on remittances, export proceeds and foreign loans to meet its liabilities. But exports haven’t increased to match the imports and avenues of foreign aid have gradually dried up, putting pressure on the Rupee and essential imports.
Last year, it narrowly avoided default due to a timely short-term loan agreement with the International Monetary Fund which provided $3 billion during nine months. The country is once again looking towards the global lender to provide a fresh loan to keep it moving.
In the trying economic conditions, Pakistan has been heavily supported by the remittances its workers living and working around the globe send. The country received the second-highest remittances of the ongoing 2023-24 fiscal at $2.8 billion in April 2024.
According to the State Bank of Pakistan (SBP), the remittances increased by 3.5% to $23.8 billion cumulatively in the first 10 months of FY24 compared to the same period last year.
Remittance inflows during April 2024 were primarily sourced from Saudi Arabia ($712 million), the United Arab Emirates ($542.3 million), the United Kingdom ($403.2 million) and the United States of America ($329.2 million), according to the bank.
The remittances earlier had peaked near $3 billion in the prior month of March 2024, marking a 23-month high.
Separately, the Dawn newspaper reported that Pakistan is engaging with the Chinese leadership for the revival of more than 1800-megawatt of hydropower projects (HPPs) and investment from fresh Chinese companies in the country’s transmission and distribution network as part of the second phase of the China-Pakistan Economic Corridor (CPEC).
The authorities are trying to convene a meeting of the Joint Cooperation Committee (JCC) of the Cabinet on May 22-23 so that Prime Minister Shehbaz Sharif’s upcoming visit to Beijing early next month will be a success.
A high-level delegation led by Planning Minister Ahsan Iqbal is currently in China to pursue existing investors and financial institutions and tap into more firms in the transmission and distribution network as part of CPEC’s second phase.
In his meeting, Mr. Iqbal sought China’s continued cooperation in the early implementation of the Azad Pattan and Kohala hydropower projects. The two sides agreed to hold the next round of the Joint Working Group meeting on Energy (JEWG) soon.
