KARACHI: Pakistan is in the “advanced stages” of securing $2 billion in additional external financing required for IMF approval of a $7bn bailout programme, State Bank Governor Jameel Ahmad said on Tuesday.

In an interview with Reuters, Mr Ahmad also said Pakistan aims to raise up to $4bn from Middle Eastern commercial banks by the next fiscal year as the country looks to plug its external financing gap.

Mr Ahmad said he expected the country’s gross financing needs would be smoothly me — both over the next fiscal year and in the medium term.

Pakistan has relied on long-time allies such as China, Saudi Arabia and the United Arab Emirates to roll over or renew loans rather than force a repayment crunch. Mr Ahmad said he expected similar assurances would be given for the next three years, giving the government more time to get its finances in order.

In addition, Mr Ahmad said the central bank reckoned Pakistan’s gross fin­ancing needs for the coming years would be lower than the 5.5 per cent of gross domestic product projected by the IMF in its latest country report in May.

“Pakistan’s external gross financing needs have been declining in the past few years,” he said. “Since (the IMF’s) assessment was based on a higher current account deficit than realised in fiscal 2024 and now projected for the next few years, we assess the ratio of gross financing needs to GDP to be lower than the 5.5pc level.”

Rates and inflation

Asked about monetary policy, the SBP chief said recent interest rate cuts in Pakistan have had the desired effect, with inflation continuing to slow and the current account remaining under control, despite the cuts.

“The Monetary Policy Committee will review all these developments,” Mr Ahmad said, adding that future rate decisions could not be predetermined.

The SBP cut rates for two straight meetings from a historic high of 22pc to 19.5pc, and will meet again to review monetary policy on Sept 12.

There have been some concerns in markets that the government might take advantage of lower interest rates to borrow more, but the central bank chief said this was not his expectation.

“We understand that the government will continue on the path of fiscal consolidation, notwithstanding the reduction in interest rates,” Mr Ahmad said.

Mr Ahmad, who was app­ointed the SBP governor for a five-year term in August 2022, said his first year had been “quite difficult”.

In 2023, Pakistan faced an acute balance of payments crisis with only enough central bank reserves to cover a month of imports. After eight months of tough talks over fiscal discipline, the IMF threw Pakistan a lifeline in the form of a nine-month $3 billion bailout programme.

Published in Dawn, August 28th, 2024

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