KARACHI: The Roshan Digital Account (RDA) inflows fell 6 percent in April to $171 million, down from $182 million in the previous month, according to central bank data released on Tuesday.
The decline in RDA growth may be a concern for the government and the State Bank of Pakistan, which are struggling to improve their ability to pay for imports and service debts.
Based on the breakdown of RDA in April, $11 million of the overall inflow ($171 million) has been repatriated so far. In the same month, $123 million was utilised locally, leaving a net liability of $37 million to be repatriated.
RDA inflows reached $7.831 billion between September 2020 and April 2024. Of the total amount received, $4.925 billion has been used locally, and $1.587 billion has been repatriated. The net repatriable liability was $1.320 billion after this.
Since its inception in September 2020, the RDA scheme has grown to become one of Pakistan's primary funding sources. This supports the foreign exchange reserves held by the central bank, which, as of May 10, were $9.1 billion.
The reduction of the current account deficit and the financial inflows, mostly from the International Monetary Fund through its $3 billion loan programme that completed last month, enabled the SBP to meet its repayment obligations and increase its foreign reserves.
Through the use of an online system, non-resident Pakistanis (NRPs) can use the RDA facility to remotely open accounts with particular Pakistani banks and carry out banking operations such as money transfers, utility, education, and other service payments, as well as investments in Pakistan.
SBP data show that $873 million in net investments were made through RDA between September 2020 and April 2024. $317 million was invested in conventional Naya Pakistan Certificates (NPCs), whereas $523 million was invested in Islamic NPCs. $33 million was invested in the stock market.
There were additional liabilities totaling $28 million. Net repatriable liabilities totaled $1.319 billion, with an account balance of $418 million.The IMF, in its latest country report, has lowered the projection of Pakistan’s gross external financing needs to $21.044 billion for the next fiscal year 2024-25 from $24.965 billion.
It said the external and domestic financing needs in the coming years are very large, and policy adjustment will need to be sustained in the post-standby arrangement period to materialise this financing and prevent a re-intensification of fiscal and balance of payments pressures.With a $9.1 billion shortfall in external funding over the next three years, Pakistan is vulnerable and requires another IMF bailout package under the Extended Fund Facility.
The IMF’s latest report on Pakistan showed that Pakistan’s external financing gap stands at $9.091 billion over the next three years from 2024-25, 2025-26, and 2026-27. In four years from 2024-25 to 2027-28, the total external financing gap without IMF support has been estimated at $10.188 billion.
Policy-level discussions between Pakistan and the IMF have started, with a particular emphasis on important economic reforms that should lower unnecessary spending and secure a new bailout.
The negotiations are anticipated to last until May 23 and will decide the scope and parameters of the new loan programme, as well as the fiscal year's macroeconomic goals, tax and non-tax revenue targets, and budgetary targets, in consultation with the IMF.