Former State Bank of Pakistan (SBP) deputy governor Dr Murtaza Syed said Pakistan will need another International Monetary Fund (IMF) programme in June 2023, given its massive external financing needs and debt repayments, stressing that this was the worst economic crisis the country had witnessed in its history.
Talking to Bloomberg TV on Thursday, the former SBP deputy governor said Pakistan has “$10-12 billion due in debt repayment over the next six months and $35 billion worth of annual external financing needs for next three years. We will need another IMF programme after June.”
His comments come as Islamabad remains locked in engagement with the IMF over its three-year bailout programme to unlock the next tranche.
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When asked if Pakistan was ready for a hard reset, Syed said that it will be difficult given the already deteriorating macroeconomic indicators but “we have seen other countries do the right thing after suffering economic crisis similar to the one being suffered by Pakistan right now and that’s what gives me hope.”
“This is the worst economic crisis in history steered by domestic and global reasons,” he added.
According to him, Pakistan needed immediate debt relief. He said the country has to make lofty debt repayments and cannot make fiscal adjustment without debt relief.
He was of the view that the common man would be burdened beyond capacity if Pakistan failed to secure relief.
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“If this issue is not resolved, then there will be a lost decade for Pakistan,” he said.
Syed, who also briefly served as SBP’s acting governor, said the IMF was close to resuming its bailout programme for Pakistan as the government has completed the prerequisites after passing a “difficult” mini budget.
He foresaw the global lender releasing the next tranche soon.
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“IMF asked Pakistan to pass on the increase in prices of fuel and electricity to consumers which is hurting the common man through spike in inflation. Despite IMF chief’s insistence on imposing higher burden on those who can bear it, the whole population is bearing the pressure.
“There is a cash transfer programme that covers 9 million people only while poverty impacts 90 million people in the country so it will be tough for Pakistan going forward.”
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Earlier, Barclays Bank stated Pakistan might require a debt adjustment in some form given the sharp deterioration in its external position, even if some support from the IMF and bilateral institutions is materialised.
In its report on Pakistan titled ‘Payment halt a possibility’ released on February 21, Barclays said it maintains an ‘Underweight rating’ on the country’s sovereign debt.
Barclays was of the view that Pakistan’s debt metrics in and of themselves are not yet a cause for alarm.
“But the large debt stock implies that ongoing access to funds and robust economic growth are necessary to keep debt within sustainable levels,” it said.