Government to arrange $2-3 bn stopgap financing from friends

ISLAMABAD: In the wake of increasing scarcity of dollar-denominated injections from international donors, the PTI-led government would have to arrange $2-3 billion of stopgap financing from friendly countries in the coming weeks, to avert a deepening of the economic crisis before an IMF bailout is approved.

Top officials of economic ministries told The News that project financing from international donors had shrunk during the current fiscal year, because the procedural requirements for obtaining approvals from competent forums could not be fulfilled during the recent political transition.

Programme loan flows from multilateral creditors, including the World Bank and Asian Development Bank, had already halted due to the worsening macroeconomic situation. “These multiplying factors could lead towards a severe economic crisis,” said a senior official, on condition of anonymity.

The IMF package approval process would require at least six-to-eight weeks, if everything goes smoothly, at a time when the foreign reserves are depleting at an accelerated pace. “We need dollar injections of $2-3 billion, and proposals are under consideration to manage financing from friendly countries, including China and Saudi Arabia,” a top official told The News.

The IMF negotiating mission is expected to arrive in Islamabad next week. It would take at least 7-to-10 days to finalise its report. The IMF staff would need a further 4-to-6 weeks to circulate the report to members of Executive Board of the IMF. “We cannot get approval from the IMF before end-November or early December, so we desperately need to arrange stopgap financing to avert a full-blown crisis on the exchange rate front,” an official said.

The Resident Representative of the IMF in Pakistan, Teresa Daban Sanchez, said the recent IMF staff visit made a lot of progress, mostly in macroeconomic areas that would be useful for the forthcoming bailout discussions. “It would help the IMF team to expedite things as much as possible,” she said.

Sanchez said additional technical and policy level talks were needed to arrive at comprehensive and medium-term programme levels which cover macroeconomic and structural issues.

The newly-appointed government spokesman on the economy, Farukh Saleem, said no big crisis was faced by Pakistan’s economy, as it was just a matter of arranging $8 billion of inflows. After the IMF package was approved, the confidence of financial markets would be restored, as happened in the cases of Jordan and Argentina. In a connected development, Pakistan’s project financing from multilateral and bilateral donors severely dried down during the ongoing fiscal year because the Planning Commission’s Central Development Working Party (CDWP) could not meet for the last five months to approve donor-funded projects.

During the tenure of caretaker set-up, the Election Commission of Pakistan (ECP) had barred the CDWP from meeting. After coming into power, the government took time to appoint the Minister for Planning Khusro Bakhtyar, who holds the dual status of Deputy Chairman of the Planning Commission. The Planning Commission has decided to hold a meeting of the CDWP next Wednesday, but its agenda has not yet been finalised.