Pakistan’s financing needs fully met for this year: SBP chief

Published July 23, 2022
<p>State Bank of Pakistan Acting Governor Dr Murtaza Syed addresses a press conference. — DawnNewsTV/File</p>

State Bank of Pakistan Acting Governor Dr Murtaza Syed addresses a press conference. — DawnNewsTV/File

Acting Governor State Bank of Pakistan (SBP) Dr Murtaza Syed on Saturday said Pakistan’s $33.5 billion external financing needs were fully met for financial year 2022/23, adding that “unwarranted” market concerns about its financial position will dissipate in weeks.

Fears have risen about Pakistan’s stuttering economy as the rupee fell nearly eight per cent against the US dollar in the last trading week, while forex reserves stand below $10 billion with inflation at the highest in more than a decade.

“Our external financing needs over the next 12 months are fully met, underpinned by our ongoing IMF programme,” Syed told Reuters in an emailed reply to questions.

Pakistan last week reached a staff-level agreement with the IMF for the disbursement of $1.17bn in critical funding under resumed payments of a bailout package.

“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 IMF funding.

Syed played down those concerns, saying that Pakistan’s public debt profile, one of the “main flashpoints” for markets these days, is much better than in vulnerable countries with high public debt.

The country’s public debt-to-GDP ratio is 71pc.

“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, Syed said $33.5bn in gross external financing needs would be met “comfortably” with $35.9bn 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.

Syed said Pakistan was being unfairly grouped with more vulnerable countries amid panic in global markets due to a commodity supercycle, tightening by the US 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.”

Opinion

A crisis of trust?

A crisis of trust?

Most damaging fallout of the constant demonisation of opponents by political leaders is erosion of public trust in politicians.

Editorial

An unseemly dispute
08 Aug, 2022

An unseemly dispute

THERE is clarity, but perhaps not of the kind that Chief Justice of Pakistan Umar Ata Bandial hoped to achieve when...
Unfair on taxpayers
Updated 08 Aug, 2022

Unfair on taxpayers

Unfair move has drawn valid criticism as it coincides with drastic increase in income tax on salaried people and corporates.
Polio nightmare
08 Aug, 2022

Polio nightmare

AS if the resurgence of polio in southern KP were not enough, officials and international monitoring bodies must now...
Political stunt
Updated 07 Aug, 2022

Political stunt

The former PM is attempting to make a very expensive point with his decision to contest all 9 NA seats going up for by-election.
Monsoon emergency
07 Aug, 2022

Monsoon emergency

AS another wet weather system has entered Pakistan, and the federal government has declared a “monsoon...
Taliban’s denial
07 Aug, 2022

Taliban’s denial

THE Afghan Taliban’s recent statement denying any knowledge of the now deceased Al Qaeda chief Ayman...