Eyeing $4bn from friendly countries this month

Published July 17, 2022
Minister for Finance and Revenue Miftah Ismail gestures during the press conference on Saturday as Information Minister Marriyum Aurangzeb looks on.—Tanveer Shahzad / White Star
Minister for Finance and Revenue Miftah Ismail gestures during the press conference on Saturday as Information Minister Marriyum Aurangzeb looks on.—Tanveer Shahzad / White Star

ISLAMABAD: Pakistan is likely to get $4 billion from friendly countries this month to bridge a gap in foreign reserves highlighted by the International Monetary Fund, Finance Minister Miftah Ismail said, two days after sealing a deal with the lender.

The IMF reached a staff-level agreement with Pakistan on Thursday that would pave the way for a disbursement of $1.18bn. The board is also considering adding $1bn to a $6bn programme agreed in 2019.

“As per the IMF, there is a $4bn gap,” Mr Ismail told a news conference in Islamabad, referring to the shortfall in foreign reserves.

“We will, God willing, fill this gap in the month of July,” he said. “We think that we will get $1.2bn in deferred oil payment from a friendly country. We think that a foreign country will invest between $1.5bn to $2bn in stocks on a G2G (government-to-government) basis, and another friendly country will perhaps give us gas on deferred payment and yet another friendly country will make some deposits.”

Miftah expects $3.5bn from ADB, $2.5bn from World Bank and $400-500m from AIIB in current fiscal year

Depleting reserves, a widening current account deficit and the rupee’s depreciation against the dollar have left the nation facing a balance-of-payments crisis.

Without the IMF deal, which should open up other avenues for external finance, Mr Ismail said the country could have headed towards default.

He said the country would also get around $6bn from multilateral lenders this fiscal year, including $3.5bn from the Asian Development Bank and $2.5bn from the World Bank.

He said $400m to $500m was also expected from the Asian Infrastructure Investment Bank while the Islamic Development Bank was also likely to increase the funding.

‘Unpopular decisions’

The current government had to take tough and unpopular decisions to avert default, Mr Ismail said, blaming the previous administration for all the economic woes faced by the country.

He hoped the rupee would strengthen against the dollar soon after the IMF agreement was finalised, which was expected in the current month. Besides, he said the government was aiming to curb energy imports to $2.7bn this month from $3.7bn last month, which was also expected to take some pressure off the local currency.

However, he stressed that adhering to strict fiscal and financial discipline was vital to put the economy on a fast track, have sustainable economic development and attain social prosperity.

The press conference was heavily tilted towards criticising the “mismanagement and bad governance” of the previous PTI-led government, which Mr Ismail said was incapable and inefficient and pushed the country on the verge of economic default.

During the first three years of the PTI government, the budget deficit hit a historically high level of Rs3.41 trillion compared to Rs1.66tr during PML-N’s five-year tenure from 2013 to 2018.

Net debt and liabilities grew 78pc during the first three years of the PTI government to Rs53.54tr from Rs23.67tr, he said, adding that the country witnessed historic high deficits and a free fall of the rupee.

The tax-to-GDP ratio came down to 9pc according to new GDP, he said, adding that the PML-N government had left the ratio at 11pc.

He said that delay in decision-making, poor commitments with international lending institutions, particularly with the IMF, also proved disastrous for the national economy and pushed it to the verge of default.

Mr Ismail told reporters that foreign debts and liabilities increased from 33pc to 40pc and debt servicing more than doubled from Rs1.5tr to Rs3.14tr.

In budget 2022-23, the government had fixed revenue collection targets at Rs7.47tr, he said, adding that non-revenue collection was targeted at Rs1.94tr, which not only would be achieved but also surpassed.

Despite the tough fiscal position, he said the government raised its budgetary allocation of the Benazir Income Supports Programme from Rs250bn to Rs364bn.

Replying to a question, the minister said interest-free loans would be provided to youth besides promoting the IT sector, adding that the government had also provided Rs109bn for the higher education commission and allocated Rs5bn for the scholarship of the students from Balochistan.

Published in Dawn, July 17th, 2022

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