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Delay of IMF program: Pakistan gets only 47% of estimated external financing in FY23

ISLAMABAD (Eshfak Mughal): The Prime Minister Shehbaz Sharif led Federal Government has received only 47 percent budgeted external loans in the last fiscal year due to its inability to revive the stalled bailout package of the International Monetary Fund (IMF.

According to provisional statistics compiled by the Ministry of Economic Affairs, Pakistan received about $10.8 billion in foreign loans during fiscal year 2022-23 that ended on June 30th. The receipts were $11.8 billion or 53% less than the budgeted estimates of $22.6 billion.

Due to less external financing, the forex reserves of the State Bank was depreciated by almost $4 billion to $4.46 billion during the period. According to the data, the forex reserves of the SBP was depreciated from $8.395 billion in July 2022 to $4.46 billion in June 2023. They also touch the lowest level of $3.11 billion in Jan 2023 due to high payments of external loans.

The PKR also depreciated during the last fiscal year. the data shows that the Pak Rupee depreciated against the US$ from Rs.204 to Rs.290 during the last fiscal year. This depreciation of local currency brought flood of inflation and uncertainty in the economy.

According to the data, against the estimates of $7.6 billion, the incumbent govt received $5.2 billion in loans from the multilateral creditors, 31% less than the estimates during the last fiscal year. The Asian Development Bank (ADB) remained the largest creditor and extended $2.3 billion during the last fiscal year. But it was only equal to 71% of the budgeted loans. The World Bank disbursed $2.1 billion in loans against the annual estimates of $2.6 billion. The Islamic Development Bank gave $161 million for oil financing against the estimates of $1.2 billion.

Against an annual estimate of $7.5 billion, Pakistan received $2.2 billion in foreign commercial loans in the last fiscal year, 71% less than the budgeted amount. In June, Pakistan received $1.3 billion foreign commercial loans from China. Poor credit ratings and failure to revive the stalled programme led to low disbursements by the foreign commercial banks. The planned $2 billion sovereign bond-based borrowing did not materialise due to poor credit ratings and expected high-interest costs.

The government also expected to receive $3 billion from the IMF, later increased to $3.5 billion, but only got $1.2 billion till the end of this fiscal year. The remaining amount lapsed with the programme expiry in June.

Furthermore, the government received only $789 million under the Naya Pakistan Certificates against the annual estimates of $1.63 billion. The government had increased the interest rates on the Naya Pakistan Certificates to attract more loans. The bilateral creditors disbursed $1.5 billion as against the estimates of $970 million. The higher disbursements were because of the Saudi Arabian oil facility. Against the budgeted amount of $800 million, Pakistan received $1.2 billion equal oil from Saudi Arabia.

The decrease in disbursements was mainly because of the fact that major international creditors stayed away due to the government’s inability to timely revive the $6.5 billion Extended Fund Facility (EFF). The IMF programme ended with $2.6 billion remaining undisbursed.

 “The overall risk of sovereign stress is high, reflecting a high level of vulnerability from elevated debt and gross financing needs and low reserve buffers,” stated the new IMF staff level report released this week.

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