KARACHI: A brokerage report published on Saturday suggests that Pakistan is poised to receive the next installment of the $3 billion stand-by arrangement (SBA) with the International Monetary Fund (IMF), despite the possibility of missing some deadlines.
Topline Securities revealed that Pakistan successfully met the targets for net international reserves, net domestic assets, and foreign currency swap/forward positions as of the end of June 2023. However, it noted that Islamabad fell short of achieving the targets for the primary deficit (which measures the fiscal balance excluding interest payments) and external public debt disbursements.
The report also highlighted that Pakistan has yet to implement the gas price adjustment, which was a prerequisite for the completion of the second review of the IMF program.
In July, Pakistan received the first tranche of the stand-by arrangement from the IMF, amounting to $1.2 billion, following approval by the lender’s Executive Board to stabilize the country’s economy. According to the agreement, the remaining $1.8 billion from the IMF is scheduled to be disbursed in two tranches after reviews in November and February.
The current IMF program has established nine performance criteria, four indicative targets, and 10 structural benchmarks for the upcoming review.
The governor of the State Bank of Pakistan, during an analyst briefing on September 14, reported that all quantitative performance targets related to the central bank, including net domestic assets, swaps, and net international reserves, had been met.
Likewise, the Finance Ministry reaffirmed its commitment to maintaining fiscal discipline and achieving primary balance targets.
Topline Securities, in its report, stated, “Despite challenges and a few missed targets, related to external funding, primary deficit, gas prices adjustment, etc., we think that there is a high probability that Pakistan will receive the next IMF tranche.” The report added, “We believe that if the government can successfully manage the current account deficit [CAD] to around $4 billion for FY2024 versus $6.5 billion, it can meet its financing requirements, especially when commercial borrowing is next to impossible.”
The ministry has projected gross external financing requirements of $28.4 billion, including the current account deficit of $6.5 billion for the current fiscal year, aligning with IMF projections cited in the latest country report.
Regarding funding sources, the government aims to secure a total of $11 billion, with contributions of $5 billion from China and $6 billion from Saudi Arabia in the form of rollovers and an oil facility with deferred payments, as outlined in the Topline report.
The government anticipates around $6.3 billion from multilateral creditors, including the World Bank, Asian Development Bank, Islamic Development Bank, and the Asian Infrastructure Investment Bank, according to the report.
As per the SBP governor, the total external financing requirement for FY2024 amounts to $24.6 billion, of which $2.8 billion has already been paid. The SBP has received commitments for rollovers worth $8 billion, with an additional expectation of $3 billion to be rolled over, leaving a net payable amount of $8 billion.