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IMF flags risks to Pakistan’s repayment capacity

  • In staff report, lender says risks, notably from high public debt and gross financing needs, low gross reserves and sociopolitical factors, could jeopardise policy implementation and erode repayment capacity and debt sustainability
Published October 11, 2024

Pakistan’s capacity to repay the International Monetary Fund (IMF) remains subject to significant risks, the Washington-based lender said in its staff report, adding that the country remains critically dependent on policy implementation and timely external financing.

The lender said the Fund’s exposure would reach SDR 6,816 million by September 2024 (336% of quota) with purchases linked to the request.

“With completion of all purchases under the arrangement, the Fund’s exposure would peak in September 2027 at SDR 8,774 million (432% of quota; approximately 55% of projected gross reserves for FY27) around double the average for recent EFFs,” the lender informed.

In July, the IMF reached a staff-level agreement (SLA) with Pakistani authorities for a $7-billion, 37-month loan programme aimed at cementing stability and inclusive growth.

The IMF in its staff report noted that exceptionally high risks, notably from high public debt and gross financing needs, low gross reserves and sociopolitical factors, could jeopardise policy implementation and erode repayment capacity and debt sustainability.

“Restoring fiscal and external viability is critical to ensure Pakistan’s capacity to repay the Fund.

“This hinges on strong and sustained policy implementation, including, but not limited to, fiscal consolidation and external asset accumulation, as well as decisive reforms to enable stronger and more resilient economic development,” IMF said.

IMF official supports reforms in public sector

However, the Washington-based lender informed that the program is fully financed, with firm commitments for the first 12 months and good prospects thereafter.

“Financing committed for FY25 includes $16.8 billion of rollovers of existing short-term financing and $2.5 billion of additional commitments, including from China, Saudi Arabia, the ADB and the IsDB.

“The authorities have also received firm commitments from key bilateral partners to (at least) maintain their existing exposures throughout the program, including by continuing to rolling over existing short-term liabilities, which will contribute to meeting financing needs in the remaining program period.”

Moreover, loans from foreign commercial banks totalling $6.6 billion, which were renewed during the 2019 EFF and 2023 SBA, are also expected to continue to be rolled during the new program period, the lender said.

“These together with commitments from multilateral institutions provide the necessary financing assurances. Nonetheless, financing risks remain high, and continued monitoring will be needed to ensure timely and adequate financing during program reviews,” it noted.

Comments

200 characters
KU Oct 11, 2024 03:02pm
Every sensible advice or warning finds a deaf ear in our govt, n we are talking about a country with 250 million people. Mandate by people was not given to ensure humanitarian crises. Yet lies rule,
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M Arif Pervez Oct 11, 2024 06:37pm
Repayment modalities must be evolved
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Bitter Pill Oct 11, 2024 08:29pm
Pakistan will never repay it's debts. Just look at previous imf programs.
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Po Oct 12, 2024 02:54am
Shame on pk pvt sector Can't sell in world mkts Thrives on bribes subsidies tax n utilities theft
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Aamir Oct 12, 2024 03:34am
It's all IMF fault. Why do you keep giving us loans and make us survive on a ventilator. Let's us collapse once so we make the painful reforms and cut useless govt Expenditure and corruption
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Aamir Oct 12, 2024 03:35am
@Po , what about the govt sector? They are the ones who have ruined the country
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Forty Thieves Oct 12, 2024 12:45pm
It's surprising that br still hasn't published the forty conditions laid by IMF for bailout.
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