The International Monetary Fund’s delegation wraps two-week-long talks with Pakistani officials on November 15
The IMF has revised down Pakistan’s foreign loan requirements to $25 billion for the ongoing fiscal year — reducing it by $3.4 billion in a big relief for its cash-starved economy, according to a media report on Saturday. The Washington-based global lender also lowered the economic growth projection to just 2 per cent, turning down the government’s external as well as macroeconomic forecasts, The Express Tribune newspaper reported.
The International Monetary Fund’s delegation wrapped two-week-long talks with Pakistani officials on November 15 and announced that a staff-level agreement has been reached to enable it to release USD 700 million in the second tranche of an already agreed USD 3 billion loan. The report said that in comparison with July this year, the IMF lowered the foreign loan requirements for this fiscal year from USD 28.4 billion to USD 25 billion. In four months, the government has already borrowed USD 6 billion while it expects rollovers of USD 12.5 billion.
The remaining needs are about USD 6.5 billion in addition to the efforts for timely securing the USD 12.5 billion debt rollovers, said the sources. Finance Secretary Imdadullah Bosal on Thursday said the interim government was comfortable that it would secure the needed financing to remain afloat.
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However, there will not be much respite for the government as the estimated available financing has also been cut by USD 3.7 billion because of the problems in acquiring loans through floating Eurobonds and from foreign commercial banks. The sources said that the IMF did not agree to Pakistan’s projection of USD 4 billion to USD 4.5 billion current account deficit during this fiscal year against the earlier projected figure of USD 6.5 billion.
They added that the IMF had now projected a deficit of USD 5.7 billion — a reduction of about USD 770 million in comparison with its old estimates. The finance ministry sources told the newspaper that the IMF had further reduced its economic growth projection for Pakistan to 2 per cent from July’s estimate of 2.5 per cent.
The lender’s fresh forecast is now in line with the World Bank and Asian Development Bank’s projections. The IMF did not accept Pakistan’s forecast of 3 per cent to 3.5 per cent economic growth in this fiscal year. The IMF also did not accept the finance ministry’s projection of imports worth USD 54.5 billion during this fiscal year. The lender has now estimated it at USD 58.4 billion, but its revised figure is USD 6.3 billion less than what it estimated in July this year.
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Some of the gains that Pakistan will make because of the low imports are expected to be lost because of a reduction in the projected remittances. As against the old forecast of USD 32.9 billion, the IMF has now projected the foreign remittances at USD 29.4 billion — a reduction of USD 3.5 billion, the sources revealed. The exports have been marginally adjusted downwards to USD 30.6 billion, they added. The estimates of foreign direct investment also increased from USD 173 million to USD 700 million.
The IMF also has cut the inflation rate forecast from 25.9 per cent to 22.8 per cent — a move that should provide space for lowering the interest rates at least in January’s monetary policy announcement, according to the paper. The IMF did not accept the finance ministry’s projections for the current account deficit, imports, economic growth, inflation and gross financing requirements.
It quoted finance ministry sources as saying that the IMF had also lowered its inflation projection for the country to 22.8 per cent for this fiscal year — reducing it from 25.9 per cent. However, it adjusted all these numbers during the first review talks in comparison with the estimates of July this year.
The revisions to the gross external financing requirements — a sum of money needed to fill the CAD as well as the repayment of maturing debt — and to the macroeconomic projections were made during this week’s first review of the USD 3 billion bailout package. It also brought the purview activities of the Special Investment Facilitation Council, a joint civil-military forum set up this year to expedite investment and development.
The IMF remained successful in acquiring a date for the general elections and in return ignored a few critical areas, which in the past had become a cause for the failure of the previous USD 6.5 billion bailout package, the report said.
