- During SBP's podcast, Jameel Ahmad says all upcoming obligations will be met on schedule, reserves' position to improve in second half of ongoing fiscal year
Governor State Bank of Pakistan (SBP) Jameel Ahmad moved to pacify concerns over the country's debt repayment obligations, breaking down the list of loans and external financing requirements during an in-house podcast with the central bank chief spokesperson Abid Qamar on Thursday.
"We started this fiscal year (FY23) with the plan that we will need $33 billion in financing," said Ahmad in response to the question posed by Qamar on Pakistan's external financing and balance-of-payments' position.
"Of this amount, roughly $23 billion was the principal amount needed to be repaid. The remaining, $10 billion, was the projected current account deficit.
"More than $6 billion have been paid back, while agreements to the effect of $4 billion have been signed for roll-overs," added Ahmad, as he broke down the financing requirements.
"Around $8.3 billion are government-to-government commercial loans, and talks are ongoing for a rollover. We are hopeful of it.
"This leaves $4.7 billion that needs to be repaid. Of this $1.1 billion are commercial loans from foreign banks. We do not have any Eurobond to repay this year. Around $3.5 billion are owed to multilateral and other loans."
Ahmad said the plan was to arrange $34-38 billion in foreign exchange inflows during the ongoing fiscal year.
"We received inflows amounting to $4 billion. A lot of the inflows we were expecting to receive have moved to the second half of FY23. Now, the inflows will be higher than outflows, and the SBP reserves' position will improve in the second half of FY23."
His podcast comes on the day SBP-held foreign exchange reserves fell precariously to $6.715 billion, the lowest level since January 2019, data shows.
The level is barely enough to cover 1.5 months of imports and is weighed against a current account deficit that clocked in at $567 million during October alone, which is 56% higher on a month-on-month basis.
However, cumulatively, the country recorded a current account deficit amounting to $2.821 billion in July-October (4 months) of FY23 compared to $5.305 billion in the same period of the previous fiscal year, a decline of $2.484 billion.
The four-month deficit is in check when compared with fiscal year's projection of $10 billion.
Ahmad, during the podcast, said the government is also in talks with a friendly country for the disbursement of a $3 billion loan and negotiations with multilateral agencies are progressing for further financial support.
"The debt profile of Pakistan is composed of bilateral and multilateral creditors and only a small percentage is owed to foreign banks. The SBP has enough reserves to repay all obligations in an effective manner and the inflows expected will boost forex reserves."
Ahmad added that historic floods led to expectations of some increase in imports particularly that of wheat, fertilisers and cotton, a development that could have offset the SBP's earlier projection of a $10-billion current account deficit for FY23.
"In the international market, however, some important developments have taken place including a decrease in the price of petroleum products. The SBP has also taken policy actions that will reduce some outflows significantly.
"As a result of these policy interventions and other measures, it is expected that CAD will remain below $10 billion for FY23."
Ahmad's remark on SBP's measures and policy interventions refer to import restrictions that have irked businesses that argue they need imports to manufacture products in the country. Similarly, the struggle to open letters of credit have also gained traction in recent months, raising concerns on the country's economic growth.
Ahmad said SBP's priority sectors are petroleum and pharmaceuticals.
"There are absolutely no restrictions on the import of petroleum products, or on the import of raw material or inputs related to the pharmaceutical sector.
"We recognise that administrative measures on imports must not be continued and we need to relax them gradually. From next year, we may review them and bring more ease to the businesses," said Ahmad.
The SBP's podcast comes at a time when the South Asian nation battles challenges on multiple fronts including falling reserves, and a currency that has depreciated over 21% this calendar year alone.
The government has also been aggressively looking to tap foreign shoulders for bilateral support, especially as talks between Pakistan and the International Monetary Fund (IMF) keep lingering over approval of the ninth review of its bailout programme.
The IMF review for the release of its next tranche of funding has been pending since September, leaving Pakistan in dire need of external financing.