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Business & Finance

Pakistan's financing needs fully met for this year, says SBP chief

  • Dr Murtaza Syed reiterates that 'unwarranted' market concerns about country's financial position will dissipate in weeks
Published July 23, 2022
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ISLAMABAD: Pakistan's $33.5-billion external financing needs are fully met for financial year 2022/23, the central bank chief reiterated on Saturday, adding that "unwarranted" market concerns about its financial position will dissipate in weeks.

The statement comes just days after Dr Murtaza Syed, the acting governor of State Bank of Pakistan (SBP), had conveyed a similar position to Bloomberg, saying then that Pakistan remains in a position to meet its elevated funding needs, while the crucial International Monetary Fund (IMF) bailout programme "puts a lot of daylight between Pakistan and more vulnerable countries".

Read the story here: SBP says concerns about Pakistan 'unfairly overblown'

However, fears have risen over Pakistan's stuttering economy that saw its currency fall over 8% against the US dollar in the last trading week, while SBP-held forex reserves stand below $10 billion with inflation at the highest in more than a decade.

Pakistan’s external debt is low, of relatively long maturity, and on easier terms since it is heavily skewed toward concessional multilateral and official bilateral financing rather than expensive commercial borrowing: SBP Acting Governor Dr Murtaza Syed

"Our external financing needs over the next 12 months are fully met, underpinned by our on-going IMF programme," Dr Syed told Reuters in an emailed reply to questions.

On July 14, the IMF announced its staff-level agreement with Pakistan authorities for the disbursement of $1.17 billion in critical funding under resumed payments of a bailout package.

IMF wants assurance on Saudi funding to Pakistan before it disburses loan: report

"The recently secured staff-level agreement on the next IMF review is a very important anchor that clearly separates Pakistan from vulnerable countries, most of whom do not have any IMF backing," he said.

However, the lender's board needs to approve the agreement before the disbursement, which is expected in August, before which there remain prior policy actions to be fulfilled, according to sources familiar with the matter.

But some question Pakistan's ability to meet external financing needs, including debt obligations, despite the IMF funding.

Dr Syed played down those concerns saying Pakistan's public debt profile, one of the "main flashpoints" for markets these days, is a lot better than in vulnerable countries with high public debt.

The country's public debt-to-GDP ratio is 71%.

"Pakistan’s external debt is low, of relatively long maturity, and on easier terms since it is heavily skewed toward concessional multilateral and official bilateral financing rather than expensive commercial borrowing," he said.

In a recent presentation to international investors reviewed by Reuters, Dr Syed said $33.5 billion in gross external financing needs would be met "comfortably" with $35.9 billion in available financing.

Most of the financing was shown from multilaterals, oil payment facilities, and rollovers of bilateral financing, and the heaviest financing needs were in Q2 of FY2022-23.

The presentation also compared the situation in Pakistan to Sri Lanka, which recently defaulted, and said: "Pakistan tightened monetary policy and allowed the exchange rate to depreciate as soon as external pressures began."

It added that Sri Lanka’s fiscal position had been much worse than Pakistan’s, with primary deficits three to four times larger since the pandemic.

Dr Syed said Pakistan is being unfairly grouped with more vulnerable countries amid panic in global markets due to a commodity supercycle, tightening by the U.S. Federal Reserve and geopolitical tensions.

"Markets are responding to these shocks in an unfairly broad-brush way, without paying enough attention to Pakistan’s relative strengths," he said.

"We expect this reality to dawn in the coming weeks and the unwarranted fears around Pakistan to dissipate."

Comments

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Anonymous Jul 23, 2022 06:51pm
A big lie to nation.... Doesn't seems like that...
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Hussain Jul 23, 2022 11:55pm
الحمد لله رب العلمين
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samir sardana Jul 24, 2022 10:17pm
The IMF facility, is the Put Option It ensures rollovers of Bilateral & Multi loans,& also,no LC confirmations,& smooth roll overs of ISB There is no comparison with Lanka - which has lost, its ONLY strength - EXPORTS The empty stadiums,empty roads,empty airports,empty towers - yield no income - but are financed by 20 year loans at 10 to 320 BP ROI.Even the 500 Million USD loan of ISB repaid by Lanka,WAS BOUGHT IN OFF MARKET TRADES,AT 50% OFF THE PAR VALUE (BEFORE THE REDEMPTION).SUCH THINGS CANNOT HAPPEN, IN PAKISTAN Pakistan has NO WHITE ELEPHANTS EVEN CPEC will HAVE AN EQUITY INVESTMENT FROM THE CHINESE PRC CANNOT WAIVE THE LOANS OR SWAP INTO EQUITY AS ALL OTHER NATIONS WILL ALSO DEMAND THE SAME WAIVERS LANKAN CRISIS IS A HYBRID ASSYMETRIC WAR AGAINST PRC - SILK ROUTE & BRI - TO DESTROY THE PRC INVESTMENTS - & FORCE CHINA TO DO DEBT WAIVERS OR EQUITY SWAPS. (SAME FOR ATTACKS ON CHINESE IN PAKISTAN).dindoohindoo
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