Creditors pledge continued support for Pakistan

ISLAMABAD: In an effort to jack up disbursements of foreign loans in the remaining months after clinching the Staff Level Agreement with the IMF, multilateral and bilateral creditors on Tuesday pledged continued support for Pakistan and acknowledged the importance of transparency, alignment with government priorities and the need for timely disbursement of committed support.

Out of the total committed donors loans of $17.6 billion, Pakistan has so far received $3.8 billion inflows and if the IMF’s disbursed tranche was included, it went up to $5 billion. However, the problem is that the major chunk of disbursement materialized during the tenure of the last PDM regime.

After the caretaker government was sworn in, in August 2023, the country has received only $300 million on an average on a monthly basis in the last three months. On the other hand, the repayment of external debt exerted pressures and foreign exchange reserves got depleted in range of $1 billion after the caretaker government came to power. Now after the successful striking of SLA with the IMF, hopes have emerged that disbursement of loans and grants would accelerate in coming months.

In this context, Federal Minister for Finance, Revenue & Economic Affairs Dr. Shamshad Akhtar convened a meeting of the Donor Coordination Committee (DCC) at the Ministry of Economic Affairs on Monday (November 20). The minister highlighted the steadfast and critical support of development partners in supporting Pakistan. Despite external factors impacting Pakistan’s economy, including tightening global financial conditions and rising commodity prices, the successful review of the IMF Staff Level Agreement was a significant achievement.

She emphasized the government commitment to macroeconomic adjustment and welcomed ongoing support from development partners. She reported positive signs of economic recovery, expecting the GDP growth between 2 to 2.5% in the fiscal year 2024, up from 0.5% in the fiscal year 2023.

She stated that the government was actively pursuing reforms in fiscal consolidation, monetary policy, currency market sustainability, energy, business environment and social safety nets. She acknowledged the challenges faced by vulnerable households due to fiscal belt tightening and highlighted the government commitment to addressing poverty and improving economic conditions.

Representatives from the World Bank, EU, ADB, USAID, UNDP, Germany, Japan, WFP, IsDB, IFAD, and others offered congratulations on the successful IMF review. The development partners pledged continued support for the government of Pakistan and acknowledged the importance of transparency, alignment with government priorities and the need for timely disbursement of committed support.

The minister expressed gratitude for the support received and emphasized the need for cooperation to track off-budget support. Drawing attention to devastating floods in Sindh and Balochistan, she emphasized the critical need for swift and efficient transactions, prioritizing the timely disbursement of committed support to effectively address these challenges.

As the government prepares for the upcoming CoP-28, the chair called for efforts to optimize the capital of multilateral development banks (MDBs) and increase lending headroom. The appeal for debt for Nature and social development swaps was reiterated, signaling a commitment to meeting climate finance targets.

Present at the meeting were ambassadors from Italy, Japan and Kuwait to Pakistan. Notable international donor agencies in attendance comprised World Bank, ADB, AFD, USAID, UNDP, JICA, TIKA, WFP, KOICA, FCDO, UNICEF, KfW and IsDB. Diplomatic representation was extended from the Embassies of the United States of America, Republic of Korea, France, Denmark and People’s Republic of China.

The gathering also welcomed key figures including the Head of Development Cooperation from the European Union (EU), Head of Cooperation and Counsellor from the Canadian High Commission, United Nations Resident Coordinator and the Deputy High Commissioner from the Australian High Commission.