Interim Finance Minister Shamshad Akhtar has claimed Pakistan expects to raise approximately $4.5 billion from multilateral and bilateral sources, excluding the International Monetary Fund (IMF), in the ongoing fiscal year 2023-24.
In an interview published in the November-December 2023 issue of the Journal of ICMA International, she said the government estimates it will receive over $1.6 billion in the second quarter—ending Dec. 31. Among the country’s major creditors, she said, were the Asian Development Bank, the World Bank, and the Asian Infrastructure Investment Bank. These inflows, she explained, would comprise both project-based and program-based funds.
According to the caretaker, disbursements are expected shortly for program loans whose negotiations have concluded. “The country is currently meeting its debt obligations in a timely manner and intends to continue doing so in the future,” she said. Regarding the ongoing $3 billion Standby Arrangement with the IMF, she reiterated a staff-level agreement was inked after the successful completion of the first review. The IMF Executive Board is expected to take up the matter in January, with its approval granting Pakistan access to around $700 million.
Discussing the prevailing economic situation, the minister maintained that the government had achieved fiscal and external sector stability through various stabilization measures and structural reforms, despite prevailing domestic and global challenges. According to data provided by the State Bank of Pakistan (SBP), Pakistan’s fiscal deficit has declined to 7.7% of GDP in the ongoing fiscal, as compared to 7.9% last year. At the same time, the current account deficit for the same period stands at $2.2 billion against the $17.5 billion recorded last year.
Fitch ratings
Akhtar’s interview was published as global ratings agency Fitch on Wednesday maintained Pakistan’s long-term foreign currency issuer default rating at ‘CCC,’ expressing concerns over uncertainties surrounding upcoming general elections and the potential for ensuing political volatility, which it warned could impact the implementation of structural reforms and pose economic challenges.
In its statement, the ratings agency said it expected high but easing external risks in the coming year, adding the ‘CCC’ rating reflects high external funding risks amid high medium-term financing requirements. “We expect elections to take place as scheduled in February and a follow-up IMF program to be negotiated quickly after the SBA finishes in March 2024, but there is still the risk of delays and uncertainty around Pakistan’s ability to do this,” it said.
Noting it expected the IMF board’s SLA approval without problems, it said the successful first review reflected continued fiscal consolidation, energy price reforms and moves towards a more market-determined exchange rate regime. The agency also praised policies undertaken by the interim government, including sharp hikes to natural gas and electricity prices and a crackdown on the black market, helping narrow the gap between the parallel and interbank exchange rates and bringing more foreign exchange into the banking system.
However, referring to the upcoming polls, the agency warned that parties across Pakistan’s political spectrum often failed to implement or reverse reforms agreed with the IMF. “We see a risk that the current consensus within Pakistan on the measures necessary to ensure continued funding could dissipate quickly once economic and external conditions improve, although Pakistan now has fewer financing options than in the past,” it said, adding a new IMF program would require Pakistan to “undertake sweeping structural reforms in opposition to entrenched vested interests.”
To persistent speculation over delayed polls, it warned that any renewed political volatility would jeopardize IMF negotiations and external funding. The ratings agency also noted that Pakistan’s foreign exchange reserves had recovered on inflows of new funding and limited current account deficits. It said the reserves were expected to further increase.